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01 Dec 22. South Africa: Panel report increases likelihood of president’s impeachment. On 30 November, an independent panel appointed to investigate President Cyril Ramaphosa’s fitness for office concluded that it had identified evidence that the president had violated his oath of office and possibly engaged in serious misconduct. The statement comes in relation to queries over USD 4m which was stolen from Ramaphosa’s Phala Phala farm in 2020. The ruling African National Congress’s (ANC’s) National Executive Committee will discuss the findings today. The report will also be debated in the National Assembly on 6 December. Both instances will likely raise the prospect of Ramaphosa’s impeachment. However, if the NEC does not agree with the report’s findings, the likelihood of impeachment will decrease, especially as the ANC holds a substantial majority in the National Assembly. Nevertheless, the matter will undermine Ramaphosa’s re-election bid at the ANC’s national elective conference between 16-20 December, raising government stability risks. (Source: Sibylline)
01 Dec 22. Japan seeks to increase defense spending to 2% of GDP.
Japan’s prime minister has asked his Cabinet to secure enough funds to raise defense spending to 2% of gross domestic product in five years, continuing a recent trend of increasing the defense budget, according to the country’s defense minister.
Fumio Kishida told Finance Minister Shunichi Suzuki and Defense Minister Yasukazu Hamada during a meeting that Japan needs to urgently increase its defense budget by fiscal 2027, Hamada said.
Kishida also said his administration needs to review government expenditures and revenue streams, as well as decide how it can secure extra funding to increase the defense budget, Hamada added.
Japan typically spends no more than 1% of its GDP on defense; the increase to 2% would bring it in line with the aspirations of NATO members, of which Japan is not a signatory.
The proposed increase would total about $287 bn over the next five years. In comparison, Japan’s defense budget for the fiscal year that ends in March 2023 is $39.66 bn.
Japan considers North Korea’s nuclear ambitions and China’s military activity in the region as threats to the homeland. To that end, the government plans to revise its national security strategy by the end of this year. That document provides Japan with long-term diplomacy and security policy guidelines.
The defense spending announcement follows several other military-related changes, such as allowing the export of military equipment and the acquisition of longer-ranged weapons.
Japanese media has reported the country is seeking up to 500 Tomahawk cruise missiles from the U.S. This comes after word the Asian nation is getting standoff, air-launched missiles for its F-35 fighter jets and is increasing the range of its indigenous land-based anti-ship missile.
US aircraft manufacturer Boeing also recently announced Japan awarded it a contract for two further KC-46A tankers, bringing its fleet to six. Two aircraft were already delivered, the first in October 2021 and another in February 2022. (Source: Defense News)
01 Dec 22. Somalia: Funding gaps will likely impede humanitarian efforts, exacerbating regional instability. On 1 December, the UN aid chief stated that although a famine has not yet been declared in Somalia, people are already dying from starvation. This comes amid discussions about a likely UN request for 25 percent more funding in 2023 to support humanitarian aid operations. In 2022, the UN asked for USD 41 bn, though it only received 44 percent of the necessary funding. The Horn of Africa is already in the midst of a fifth consecutive failed rainy season; around 7.8 m people in Somalia face droughts, while almost 213,000 others will possibly be pushed to the brink of famine. Global economic challenges will likely sustain widening funding gaps into 2023, hindering humanitarian efforts. The extremist Al-Shabaab group will likely capitalise on any resultant insecurity, heightening threats to humanitarian aid workers and increasing the likelihood of the group’s expansion. This will exacerbate regional instability across the Horn of Africa more generally. (Source: Sibylline)
01 Dec 22. Colombia: FARC presence in indigenous zones of Cauca will increase risks in the immediate vicinity. Local officials stated on 29 November that around 1,000 individuals affiliated with FARC dissident guerrillas had moved into the indigenous reserve of Chimborazo in Morales (Cauca department). FARC dissidents were also reportedly present in rural areas of Agua Negra and Honduras. Clashes between guerrillas in the area and the security forces have increased since mid-November. Local communities will likely demand a heightened security force presence in the area, increasing the risk to bystanders in the immediate vicinity. Nevertheless, the risk of armed clashes impacting cities and highways in the wider area remains low. (Source: Sibylline)
30 Nov 22. Rising public dissent to ‘zero-Covid’ proves a testing challenge at start of Xi Jinping’s third term.
Key Points
- The 20th National Congress of the Chinese Communist Party (CCP) has further elevated Xi Jinping’s ‘core leader’ status, raising the political stake of the ‘zero-Covid’ strategy that is closely linked to Xi.
- Rising infections driven by highly transmissible SARS-CoV-2 subvariants undermine the effectiveness of the virus elimination strategy while exacerbating its far-reaching impact on people’s lives and livelihoods.
- Mass anti-lockdown protests constitute the most serious episode of social unrest under Xi’s decade-long leadership. The scenes of various sections of society protesting for a common cause in multiple urban centres represent a significant threat to the CCP’s perennial objectives of upholding social stability and preserving the single-party political system.
- Tightening security and online information control demonstrates Beijing’s determination to prevent further protests and unrest. Heavy security presence will remain at popular public places in major cities over the coming days, which could cause disruption to businesses in the proximity.
- The protests will likely lead to a concerted move to ease certain Covid-19 restrictions which will help allay some of the sharpest grievances. However, the CCP government could soon face a new outbreak unless it can swiftly expand hospital capacities and boost vaccination rates among China’s high-risk population.
FOREIGN AND DEFENCE AFFAIRS
Military leadership reshuffles raise profile of national security amid growing geopolitical competition
Key Points
- National security will feature more prominently in China’s foreign and defence affairs following the CCP’s 20th congress. After almost three years of Covid-19 lockdowns and restrictions, the party sees itself more exposed to risks and threats, both in domestic and foreign settings, than before. The recent military leadership reshuffles prioritised commanders with combat experience and loyalty to Xi Jinping.
- While an emphasis on political loyalty will provide the foundations for a stable government, top echelons of the party and military leadership may become an ‘echo chamber’ promoting hard-line policies amid growing securitisation across various domains, including society, the economy and technology.
- Beijing’s foreign and defence policy will continue to be highly assertive, often in the form of more aggressive and regular military shows of force and intrusions, against both regional and global competitors. While Beijing will likely reassess some of its major foreign policy initiatives, such as the Belt and Road Initiative (BRI), security is expected to be a critical aspect of such considerations. (Source: Sibylline)
30 Nov 22. Ghana: Budget Cuts.
Key Points
- High levels of debt and heightened global consumer prices have exacerbated deteriorating economic conditions in Ghana, driving a cost of living crisis that has prompted repeated protests in Accra.
- While the government has made progress in securing a key USD 3 bn loan from the IMF, further cuts will likely be needed to satisfy creditors and finalise the agreement.
- Such cuts will act as a driver of further protests over the coming months. However, in the longer term, this unrest will likely reduce, mitigating threats to government stability as debt restructuring will prevent the government from having to impose severe financial measures to stabilise the economy.
Ghana faces significant economic challenges as unsustainable levels of debt have been exacerbated by high inflation rates, compounded by the depreciation of the cedi
Ghana’s economy is in a state of near crisis. The national currency, the Cedi (GHS), was ranked as the world’s worst-performing currency this year in October. This is largely connected to high levels of debt, further exacerbating inflation, driving a cost of living crisis which has prompted repeated protests in Accra.
Ghana’s debt-to-GDP ratio is estimated to have increased to 90.7 percent this year, from 31.3 percent in 2011. Investors perceived the government’s fiscal efforts to preserve debt sustainability as insufficient, prompting their mass exit from the currency and bond markets. This has intensified pressure on foreign exchange reserves, causing shortages and exacerbating high inflation rates despite the Central Bank increasing its benchmark interest rate to record highs (Sibylline Daily Analytical Update – 7 October).
This decline in the value of the GHS and limited access to foreign currency has rendered Ghana even more vulnerable to the impacts of heightened global community prices connected to Russia’s invasion of Ukraine. Ghana is highly reliant on imports of key basic goods including food and fuel, driving inflation which reached 40.4 percent in October.
IMF agreement is key to stabilising the economy, increasing likelihood of further cuts despite budget
The government is currently in negotiations to secure a three-year Extended Credit Facility from the IMF for around USD 3 bn, which Fitch Ratings forecasts will push Ghana’s economic growth to 4.6 percent in Ghana in 2023, provided an agreement is reached by early next year. While the timeline for such an agreement has not yet been confirmed, the Ministry of Finance claimed that the 2023 budget delivered on 24 November has significantly advanced the negotiation process.
The budget’s new debt sustainability plan, including cuts to government departmental discretionary spending, alongside the acknowledgement of the scale of Ghana’s financial difficulties and the necessity of debt restructuring, has been widely welcomed as a positive step. However, further budget cuts will likely be necessary before an agreement is reached.
The budget and the new “debt sustainability plan” represent a clear effort to balance the need to reduce debt with mitigating rising unrest over the cost of living. Alongside some spending cuts and a VAT increase of 2.5 percent, the government also reduced a controversial levy on electronic transfers and announced plans to expand social programmes. However, with international bondholders asked to accept losses of up to 30 percent and forgo some interest payments, the IMF and international creditors will likely seek evidence of greater spending constraints.
Forecast
Following the budget announcement, the opposition claimed that it would not accept the VAT increase, claiming that it shifted the economic burden onto ordinary citizens. The President of the Ghana Union of Traders Association (GUTA), which demonstrated its organisational capabilities when it suspended commercial activities in Accra for three days in October, warned that the union would lead traders to reject any new taxes.
Alongside opposition to tax increases, developments in negotiations with the IMF and creditors, particularly in the event of any announcements on spending cuts as a condition for agreements, will act as further flashpoints for unrest over the coming months. Protests against IMF support were held on 7 November by civil society groups and these are likely to continue in the short term. Such demonstrations will likely be sufficiently large that there is an elevated risk that security forces will utilise tear gas, water cannons and rubber bullets to disperse protesters, driving threats to the safety of bystanders and disrupting transit along key routes, impacting supply chains.
However, despite unrest being likely in the short term, debt restructuring negotiations will lessen pressure on the government to enact significant cuts to stabilise the economy, reducing the risk of a substantial escalation in protests beyond mid-2023. Combined with the likely stabilisation of the GHS and reduced inflation, this will decrease the likelihood of the emergence of a nationwide movement, capable of organising large-scale and regular protests threatening government stability. (Source: Sibylline)
30 Nov 22. Peru: Third impeachment attempt against President Castillo increases risk of government instability. On 29 November, Peruvian lawmakers presented a draft impeachment motion against President Castillo, their third attempt to unseat the president since he was elected in July 2021. The motion was presented with the signatures of 67 of the 130 legislators and cited corruption allegations. 87 votes are required to unseat the president. The impeachment attempt comes amid escalating tensions between the two government branches. Castillo has said the legislature is attempting a coup d’etat against him while opposition lawmakers claim he is trying to illegally shut down Congress. Lawmakers will now vote on 1 December, on whether to accept the motion. If approved, President Castillo could be called to testify as early as 12 December. The process increases the risk of government instability, likely impacting the functioning of government services.
30 Nov 22. Colombia: IED attack targeting police station in Cauca department highlights elevated security risk. An improvised explosive device detonated near a police station located in Bordo (Cauca department) on 29 November. The incident did not lead to any casualties. However, at the moment of the explosion, some local officials were present in the area and were later evacuated. FARC guerrilla dissidents have committed several shooting and IED attacks against police stations in the municipalities of Corinto, Toribio and Balboa since 27 November. The incidents come amid a turf war in the area due to a territorial dispute between FARC dissidents and the ELN guerrilla group. This is likely to sustain the elevated risk of attacks in the region, posing a threat to personnel operating in rural areas. (Source: Sibylline)
30 Nov 22. Lebanon: Armed clashes highlight continued circulation of firearms; elevate physical security risks in urban areas. On 29 November, armed confrontations in southern Beirut forced some residents to evacuate their homes due to concerns over widespread gun violence. Lebanon’s Internal Security Forces confirmed gunfire in Burj Brajneh, a refugee camp primarily hosting Palestinians. Authorities added that clashes involved suspected drug traffickers. Recent developments highlight the persistent circulation of firearms and the increased prevalence of organised crime groups. Moreover, the incident underscores an increase in narcotics trading amid sustained deteriorations in Lebanon’s socio-economic environment, driven by recent currency devaluations. Lebanon’s inability to adequately fund its border forces and local police will exacerbate security concerns at its porous border with Syria, sustaining illicit activities. The increase in organised criminality, whether arms or drug trafficking, will elevate physical security risks for personnel and assets based in urban areas of Lebanon. (Source: Sibylline)
29 Nov 22. Conroy aims to speed defence acquisition despite delaying LAND 400 P3. Minister for Defence Industry Pat Conroy pledged to help streamline the defence acquisition process at the recent AIDN Policy Symposium, days after delaying the LAND 400 Phase 3 announcement, until 2023.
In a speech at the inaugural AIDN Policy Symposium this week, Minister for Defence Industry Pat Conroy warned that Australia must accelerate its defence acquisition program having lost its 10-year strategic warning time ahead of major regional conflict.
To expedite the process, the minister explained that the Albanese government would “find ways” to speed up defence acquisition, including taking on greater risk and reforming the contracting cycle.
He also pledged to reduce the number of Sovereign Industrial Capability Priorities (SICPs), warning Defence that “some sacred cows will be slain”.
Empathising with small and medium-sized Australian businesses at the symposium, Minister Conroy acknowledged that businesses need to be informed earlier whether they were likely to be recipients of defence contracts so they can effectively plan their business.
“Of course, you want to win that contract,” he said.
“But equally you want to know if there isn’t interest in what you’re doing, or there isn’t a pathway to contracting. You want to be told early, before you mortgage your house, or before you take on unsustainable debt.
“You want to know whether this has got a practical chance of success.”
Despite the claims, Minister Conroy’s comments came days after the Albanese government announced that it would postpone the selection of a preferred tender for the $18 to 27 bn LAND 400 Phase 3 project — aimed at procuring and supporting up to 450 next-generation infantry fighting vehicles.
A final decision will now be subject to recommendations handed down by the Defence Strategic Review in March. (Source: Defence Connect)
29 Nov 22. New report touts ‘AUKUS visa.’ The introduction of an “AUKUS visa” is among a raft of recommendations proposed to support a “transformation” of Australia’s sovereign defence capabilities.
PwC Australia has released a new report in collaboration with the American Chamber of Commerce in Australia (AmCham) and the Australian British Chamber of Commerce (ABCC) — Maximising Australia’s AUKUS Opportunity.
The report proposes a number of recommendations aimed at ensuring Australia capitalises on a “once-in-a-generation security and technology partnership opportunity”, which can “transform Australia’s sovereign defence capabilities”.
Among the proposals is a recommendation to introduce an “AUKUS visa”, designed to facilitate the movement of UK and US citizens to Australia.
The visa could also be used to expedite the approval process for clearances for individuals who have been vetted in the UK and US.
Other measures proposed include:
- Deeper consideration of whether mounting risks in the geostrategic environment are reflected in the culture across defence. This includes exploring whether Defence could move to “rapid prototype and implementation procurement models”.
- Clarifying the government’s role in protecting or creating domestic manufacturing capabilities, including a re-evaluation of the Australian Industry Capability Program.
- Considering the role of national workforce planning at an enterprise level to ensure defence stakeholders are not competing for resources at the detriment of the Defence system.
- Establishing an “AUKUS Office” — a tripartite agency to remove “costly bilateral export authorisations” in favour of a “framework-driven environment”.
- Reviewing the efficiency of current procurement.
According to PwC Australia CEO Tom Seymour, such measures would help “drive transformational change” across the sovereign defence industry, ensuring Australia capitalises on opportunities presented by AUKUS.
“While defence outcomes are of primary importance, AUKUS also presents a chance to deliver broader economic benefits across Australia, resulting in more well paid and highly skilled jobs,” he said.
“We believe AUKUS could be the catalyst for three key changes across Australia’s economy.”
Seymour said the trilateral agreement can help strengthen the resilience of Australia’s supply chains to help ensure access to critical products, while also building the manufacturing base and fostering innovation.
April Palmerlee, CEO of the AmCham, noted the importance of seizing economic opportunities.
“With the Indo-Pacific region now accounting for a full third of global economic output, this report highlights the opportunity for Australian organisations to respond with agility to the dynamic geopolitical environment and find ways to increase market share while at the same time improving national security,” she said.
David McCredie AM OBE, CEO of the ABCC, said these measures would further deepen collaboration between the AUKUS members.
“There are many avenues of inquiry in AI, automation and unmanned vehicles, quantum computing, and hypersonics, all with huge learning curves still ahead of us,” McCredie said.
“To partner with our friends on these important opportunities is an imperative.” (Source: Defence Connect)
30 Nov 22. South Korea scrambles jets as China, Russia warplanes enter air defence zone. South Korea’s military said it scrambled fighter jets as two Chinese and six Russian warplanes entered its air defence zone on Wednesday. The Chinese H-6 bombers repeatedly entered and left the Korea Air Defence Identification Zone (KADIZ) off South Korea’s southern and northeast coasts starting at around 5:50 a.m. (2050 GMT Tuesday), Seoul’s Joint Chiefs of Staff (JCS) said. They re-entered the zone hours later from the Sea of Japan, known in Korea as the East Sea, joined by the Russian warplanes, including TU-95 bombers and SU-35 fighter jets, the JCS said. (Source: Reuters)
29 Nov 22. Russia-Kazakhstan-Uzbekistan: Trilateral gas union will undermine energy diversification efforts. On 28 November, Kazakh President Kassim-Jomart Tokayev met with Russian President Vladimir Putin in Moscow, where both parties reaffirmed their strategic partnership. During the summit, Putin proposed the creation of a trilateral gas union between Russia, Kazakhstan and Uzbekistan. The union aims to facilitate gas exports to Central Asia. Kazakhstan and Uzbekistan are unlikely to want to galvanise their energy reliance on Moscow amid mounting tensions over the war in Ukraine. However, they both remain plagued by energy insecurity issues. These issues will become more pertinent during the winter. A breakdown of a powerplant in Ekibastuz this week left hundreds of thousands of people without power in north-east Kazakhstan, while Uzbekistan banned gas exports on 16 November to mitigate shortages. There is uncertainty surrounding the decision by Astana and Tashkent to agree to a new gas union, but such a system could alleviate gas shortages during future winters, mitigating energy insecurity and the risks of domestic unrest. (Source: Sibylline)
29 Nov 22. Israel-Palestinian Territories: Security will continue to deteriorate amid end of government formation. On 28 November, three Israeli soldiers were detained after allegedly planting an improvised explosive device (IED) targeting Palestinians near Bethlehem in the West Bank. The incident underscores continued ethno-religious tensions fuelling violent confrontations and attacks involving Israeli forces and settlers, as well as Palestinians. It comes as part of a broader trend observed over recent months. It also follows the announcement that Prime Minister-designate Benjamin Netanyahu finalised a coalition agreement with Avi Maoz, leader of the ultra-nationalist Noam party. Steps forward in coalition talks pre-empt the finalisation of the government formation process and the likely appointment of Itamar Ben-Gvir as Israel’s national security minister. Attacks which involve the use of firearms and explosives remain likely in the near term, sustaining physical security risks for business staff and assets. This follows a twin bombing in Jerusalem. (Source: Sibylline)
29 Nov 22. Russia: Energy Business Forum points to growing reliance on eastern markets. On 29 November, the Chief Executive of state-owned Russian energy giant Rosneft, Igor Sechin, highlighted Russian companies’ desire to increase cooperation with their Chinese counterparts. Speaking at the Russian-Chinese Energy Business Forum in Moscow, Sechin claimed that Russia’s pivot towards China was not a consequence of Western sanctions pressure and the associated operational difficulties, despite Moscow’s energy exports to the EU declining markedly since February. While Rosneft is set to provide ample and cheap exports to the Chinese market, Russia’s growing pivot to eastern markets is evidenced by reports that Moscow has requested India increase the supply of over 500 goods. While a deal has yet to be finalised, it highlights the impact Western sanctions are having on Russia’s domestic industry. Amid New Delhi’s purchasing of large quantities of Russian oil, this also underscores Russia’s growing reliance on eastern markets for both exports and imports ahead of the EU partial oil ban next month. (Source: Sibylline)
29 Nov 22. Haiti: Risk of international intervention remains low, despite renewed calls for military assistance. On 28 November, Haiti’s ambassador to the US reiterated a request to the international community to send a military force to Haiti to confront domestic gangs that continue to expand into urban centres. The statement comes after the police ended a gang blockade of the Varreux fuel terminal in the capital Port-au-Prince in early November. The blockade had prevented the distribution of petrol and diesel, creating a critical shortage of basic goods amid a new cholera outbreak. The proposal for an external intervention was discussed in October by the UN Security Council at the request of the US. However, no country has demonstrated a willingness to participate militarily. This is unlikely to change in the near term, sustaining the low likelihood of a military intervention. (Source: Sibylline)
29 Nov 22. Pakistan: End of fragile ceasefire raises threat of TTP attacks in coming weeks. On 28 November, the Tehreek-e-Taliban Pakistan (TTP) announced that they will end a fragile ceasefire agreement as the military continues to attack their fighters. The TTP were consolidating their forces in Waziristan (Khyber Pakhtunkhwa province), leading to protests by locals. The announcement came on the same day that Asim Munir took over as the new Chief of Army Staff (COAS) and as Pakistan’s Minister of State of Foreign Affairs Hina Rabani Khar was visiting Afghanistan. Khar is visiting at a time of souring bilateral relations which have prevented Pakistan from encouraging the Afghan Taliban to mediate between them and the TTP. The TTP are still trying to grow their capability in major cities, a process they will likely expedite going forward. However, in the short term, they will likely step-up attacks in their traditional stronghold of the former Federally Administered Tribal Areas (FATA) region in Pakistan, raising the threat of kidnapping and extortion in that area. (Source: Sibylline)
28 Nov 22. Somalia: Attacks on hotels in major cities will continue throughout offensives against al-Shabaab. At around 2000hrs local time on 27 November, al-Shabaab militants attacked Villa Rose Hotel in Mogadishu’s Bondhere district, around 1.4 kilometres east of Villa Somalia, with small arms and improvised explosive devices (IEDs). At the time of writing, fighting is still ongoing within the hotel, with at least four people confirmed dead. Government ministers frequenting the hotel have been evacuated, though Somalia’s internal security minister was allegedly injured. The attack remains consistent with al-Shabaab’s established targeting of facilities patronised by government officials, which frequently includes hotels, such as last month’s attack on the Tawakal hotel in Kismayu. Such attacks have increased in line with efforts to disrupt government coordination of offensives against al-Shabaab strongholds in central and southern Somalia. As such, the threat of further attacks against hotels in Mogadishu and other major southern and central cities will remain elevated in the coming months. (Source: Sibylline)
28 Nov 22. Malawi: Arrest of Vice President increases domestic unrest and government stability risks. On 25 November, the Anti-Corruption Bureau arrested and charged Vice President Saulos Chilima in connection with corruption investigations into the provision of state contracts to firms connected to Malawi-born British businessman Zuneth Sattar. President Lazarus Chakwera, who allied with Chilima prior to the 2020 presidential election to form the now-ruling Tonse Alliance, stripped Chilima of his duties in June in connection with the allegations, but was constitutionally unable to remove him. While Chilima has been released on bail, developments in the case and particularly a guilty verdict, will increase the likelihood of splits within the ruling coalition, disrupting the passage of policy. Additionally, the corruption charges will drive protests. Both among Chilima’s supporters around the courthouse in Lilongwe and by anti-government demonstrators in connection with mounting unrest over corruption and economic conditions, particularly fuel shortages. (Source: Sibylline)
28 Nov 22. Sao Tome and Principe: Failed coup attempt will increase transit disruption. On 25 November, the military disrupted an attempted coup which began with an attack on the army headquarters in the nation’s capital Sao Tome, between 0040 and 0600 hrs local time. The coup attempt allegedly involved 12 active-duty soldiers and four civilians including the former president of the National Assembly Delfim Neves. At least four perpetrators were killed in the incident and at least six, including Neves, have been detained. Neves split with the formerly ruling MLSTP/PSD party prior to the recent September election to join the newly formed Basta movement, which secured only 9 percent of the vote. Given Neves’ transition, the incident is unlikely to significantly increase tensions between Sao Tome and Principe’s two primary parties, the ruling ADI and the MLSTP/PSD. As all of the participants have not yet been detained, security will be heightened across the island, particularly around ports of entry, increasing transit disruption over the coming week. (Source: Sibylline)
28 Nov 22. Taiwan: Local election results do not signal shift in position on cross-Strait relations. On 26 November, the opposition Kuomintang (KMT) party performed strongly in local elections for city mayors, county chiefs and local councilors, prompting Taiwanese President Tsai Ing-wen to resign as chairwoman of the ruling Democratic Progressive Party (DPP). The KMT traditionally performs well in local elections, which focus more on local issues and the personalities of the individual candidates. President Tsai had attempted to reframe the election by highlighting the threat of China, however domestic issues such as the management of the pandemic took precedence for voters. While China’s Taiwan Affairs Office lauded the results, with the KMT typically viewed as having a better working relationship with Beijing, the party attempted to avoid being labelled “pro-China” during the election campaign. Regardless, those voted in will not determine Taiwan’s foreign policy, with no significant change to strained cross-Strait relations expected imminently. (Source: Sibylline)
28 Nov 22. Pakistan: Khan will no longer march to Islamabad, reducing threat of violent clashes and attacks. On 26 November, Pakistan Tehreek-e-Insaf (PTI) leader Imran Khan announced that he would not march to Islamabad and would instead potentially resign from state assemblies to force early elections. However, the government claims Khan’s tactical change reflects the failure of the long march to pull substantial crowds while PTI is still deliberating and yet to confirm details of their new strategy. Khan’s announcement to not march to the capital significantly reduces the threat of violent unrest in the Islamabad Capital Territory (ICT) region. Resigning, as opposed to dissolving, provincial assemblies does not guarantee early general elections and indeed, the move can be blocked if members of the opposition pass a no-confidence motion against the Chief Minister of the province. Khan’s move therefore will raise the threat of political instability at the provincial level. (Source: Sibylline)
28 Nov 22. Auditor General finds five “material irregularities” in Modise’s DoD. Secretary for Defence (SecDef) Gladys Kudjoe is the accounting officer for the Department of Defence (DoD) and the Auditor General (AG) has pointed to five “material irregularities” (MIs) needing her urgent attention.
The “irregularities” are in Auditor General Tsakani Maluleke’s 2022 consolidated general report on national and provincial audit outcomes released last week.
They pertain to procurement non-compliance (two), uneconomical procurement (also two) and inefficient use of resources. As to what is ahead, her report has it the Auditor General’s office is “in the process of making a decision on further action to be taken”.
One “irregularity” concerns the purchase of COVID-19 drug Heberon from Cuba, the subject of a Public Protector investigation as well as reported to Minister Bheki Cele’s SA Police Service (SAPS) for investigation and possible criminal prosecution.
Others are in regard to a 2017 five-year asset and inventory management contract; supply and delivery of fuel; lease payments for unoccupied office space and purchase of a thousand infrared thermometers at prices higher than National Treasury recommendations.
Included in Maluleke’s recommendations is “effective and appropriate disciplinary action” against civilians involved and for SA National Defence Force (SANDF) Chief, General Rudzani Maphwanya, do the same with Military Command officials found to be involved. In this instance, as well as for other DoD “irregularities” in the report Maluleke has it neither the accounting officer (Kudjoe) nor Maphwanya implemented any remedial action.
The fuel supply “irregularity” is now with the Directorate for Priority Crime Investigation (DPCI), more familiarly the Hawks, where an investigation is “in progress”.
One recommendation as regards lease payments makes interesting reading. According to the report, Minister Thandi Modise’s DoD convened a second board of inquiry (BOI) into the “material irregularity” in December 2021. “In its conclusion the BOI acknowledged the financial loss but did not find anyone liable for the loss. We [the Auditor General] assessed the outcome of the BOI and concluded its conclusion was not appropriate and appropriate action was not taken to implement the recommendations. We are in the process of deciding on further action to be taken”.
The thermometer purchase was also the subject of a BOI – reconvened due to “shortcomings” in the first inquiry. “As at the date of the audit report, a new BOI had not been convened. We concluded appropriate action is not being taken to address the MI.” (Source: https://www.defenceweb.co.za/)
28 Nov 22. Kazakhstan: Small-scale protests against the president’s inauguration are unlikely to escalate into mass domestic unrest. On 27 November, dozens of people gathered in Astana to protest the inauguration of President Kassim-Jomart Tokayev, who has now been officially sworn in for a second presidential term. The protest, which was rapidly dispersed, was reportedly organised by Marat Abiyev, a Kazakh businessman and leader of the Genesis Organisation, a Kazakh activist group focused on economic issues. Locals in Astana reported that internet services were temporarily cut off during the protest, a tactic also used during the January 2022 unrest. The limited size of the protest remains in keeping with our previous assessments, and we anticipate only a low risk of such protests escalating into large-scale domestic unrest. However, follow-up demonstrations in the more restive western regions would be a potential trigger for more widespread unrest. (Source: Sibylline)
28 Nov 22. Moldova: Russia will not reduce gas flow to Moldova following payment issues, mitigating risk of further deterioration in energy crisis. On 28 November, Russia’s state-owned gas company Gazprom announced its decision to not reduce the quantity of gas it is pumping through Ukrainian territory to Moldova. Gazprom has confirmed that it has received payment from Moldova’s state-owned gas company, Moldovagaz, for gas transiting Ukrainian territory that is intended for Moldovan consumers. Gazprom has previously expressed a willingness to reduce gas supplies if the transit imbalance persists, driving concerns that Moldova’s energy crisis could worsen still. Russian strikes against Ukrainian energy infrastructure have had a detrimental impact on Moldova’s energy grid, causing temporary blackouts. While Gazprom’s announcement will likely prevent a further deterioration in Moldova’s energy security in the short term, the threat of further strikes and new payment issues mean blackouts and energy shortages will remain an enduring concern, particularly as the winter season begins and energy demands increase. (Source: Sibylline)
28 Nov 22. Canada: National security strategy will increase tensions with China, increasing risks to strategic industries. On 27 November, the Canadian government unveiled its strategy paper for the Indo-Pacific region which commits to increased military spending of USD 500 m over the next five years. It names China as an ‘increasingly disruptive global power’. It also specifies that China’s ‘sheer size and influence make cooperation necessary to address some of the world’s existential pressures,’ as the country wields its significant influence to shape the global order for its own interests. The release of the strategy paper comes amid increasing tensions between Canada and China, which recently led Prime Minister Trudeau to demand divestment by Chinese firms from Canadian mining projects. The national strategy is likely to raise military and political tensions with China. This will increase detention and asset seizure risk for Canadian firms operating in China in sectors deemed strategic for national security, including semiconductors and battery development. (Source: Sibylline)
28 Nov 22. Canada to boost defence, cyber security in Indo-Pacific policy, focus on ‘disruptive’ China. Canada launched its long-awaited Indo-Pacific strategy on Sunday, outlining spending of C$2.3 bn ($1.7 bn) to boost military and cyber security in the region and vowed to deal with a “disruptive” China while working with it on climate change and trade.
The plan, detailed in a 26-page document, said Canada would tighten foreign investment rules to protect intellectual property and prevent Chinese state-owned enterprises from snapping up critical mineral supplies.
Canada seeks to deepen ties with a fast-growing Indo-Pacific region of 40 countries accounting for almost C$50 trn in economic activity. But the focus is on China, which is mentioned more than 50 times, at a moment when two-way ties are frosty.
Four cabinet ministers at a news conference in Vancouver took turns detailing the new plan, saying the strategy was crucial for Canada’s national security and climate as well as its economic goals.
“We will engage in diplomacy because we think diplomacy is a strength, at the same time we’ll be firm and that’s why we have now a very transparent plan to engage with China,” said Foreign Minister Melanie Joly.
In Beijing, a foreign ministry spokesman said Canada’s new strategy was “full of ideological bias, exaggerating and speculating the so-called China threat, and making groundless accusations and attacks against China”.
“China is strongly dissatisfied with this, resolutely opposes it and has already made stern representations to the Canadian side,” the spokesman, Zhao Lijian, added.
Prime Minister Justin Trudeau’s Liberal government wants to diversify trade and economic ties that are overwhelmingly reliant on the United States. Official data for September show two-way trade with China made up less than 7% of the total, versus 68% for the United States.
Canada’s outreach to Asian allies also comes as Washington has shown signs of becoming increasingly leery of free trade in recent years.
The document underscored Canada’s dilemma in forging ties with China, which offers significant opportunities for Canadian exporters, even as Beijing looks to shape the international order into a more “permissive environment for interests and values that increasingly depart from ours,” it added.
CHALLENGE CHINA
Yet, the document said cooperation with the world’s second-biggest economy was necessary to address some of the “world’s existential pressures,” including climate change, global health and nuclear proliferation.
“China is an increasingly disruptive global power,” it said. “Our approach … is shaped by a realistic and clear-eyed assessment of today’s China. In areas of profound disagreement, we will challenge China.”
Tension with China soared in late 2018 after Canadian police detained a Huawei Technologies executive and Beijing then arrested two Canadians on spying charges. All three were released last year, but relations remain sour.
This month, Canada ordered three Chinese companies to divest their investments in Canadian critical minerals, citing national security.
The document, in a section mentioning China, said Ottawa would review and update legislation enabling it to act “decisively when investments from state-owned enterprises and other foreign entities threaten our national security, including our critical minerals supply chains.”
In a statement, Perrin Beatty, the president of the Canadian Chamber of Commerce, said, “Because the region is both large and diverse, one size definitely does not fit all.”
Canada’s priorities would need to be very nuanced both between and within countries, he added.
The document said Canada would boost its naval presence in the region and “increase our military engagement and intelligence capacity as a means of mitigating coercive behavior and threats to regional security.”
That would include annual deployment of three frigates, from two now, as well as participation of Canadian aviators and soldiers in regional military exercises, Defense Minister Anita Anand said at a separate news conference.
Canada belongs to the Group of Seven major industrialized nations, which wants significant measures in response to North Korean missile launches.
The document said Ottawa was engaging in the region with partners such as the United States and the European Union.
Canada needed to keep talking to nations it had fundamental disagreements with, it said, but did not name them. ($1=1.3377 Canadian dollars)
(Source: Defense News Early Bird/Reuters)
23 Nov 22. Russian shipyard and Defence Ministry tangle over ship price in court. A Russian shipyard producing Karakurt-class ships for the country’s Navy is facing potential financial hardship after new lawsuits from the Defence Ministry and a series of creditors.
On Nov. 15, an arbitration court in Moscow held the first preliminary hearing for a lawsuit against Pella Shipyard in which the ministry is seeking 1.4bn rubles (U.S. $23.1m) over allegations the company was “failing to fulfill supply contacts.”
No further information was available in court papers, and a court spokesman declined to provide details, citing the pending case. Pella officials declined to comment for this story.
The lawsuit comes three weeks after Pella was part of another legal entanglement. In that one, the company received additional funding from the ministry after defense officials failed to include more money for additional capabilities for the troubled Ladoga vessel. That ship is meant to provide search and rescue operations for the Baltic Fleet.
The Defence Ministry was ordered to pay 2.6bn rubles to Pella, according to an Oct. 24 post on the Moscow city court’s website.
According to the contract for the Ladoga vessel, which was valued at around 1.5bn rubles, Pella planned to provide the ship to the ministry by November 2016. The court’s decision noted that the ministry made changes to the design and provided them to Pella company in February 2016.
Those changes, company officials said, increased the price of the vessel to more than 3.2bn rubles. Due to adjustments to the ship’s size, among other features, the company was unable to deliver the vessel until September 2018.
The Defence Ministry refused to pay additional costs, citing existing governmental provisions that doesn’t require contractual changes for state orders after the original tender.
Pella officials told the court they couldn’t afford the additional cost, as it would bankrupt the company.
The company also provided the court with a protocol of disagreement, signed by Deputy Defence Minister Alexey Krivoruchko, which mentions the new price discussed by the company and defense officials.
The Russian Defence Ministry and the Russian Embassy in Washington did not respond to requests for comment.
A former shipbuilding industry official, speaking to Defense News on the condition of anonymity, described the 2.6bn ruble payment ordered by the court to be paid to Pella as “rather huge.”
However, he added, the “discipline to fulfill [state] orders has improved in recent years,” and it is common for defense officials to make “additional wishes” that end up increasing costs beyond those laid out in original contacts.
Pella is also fighting with more than a dozen creditors in court, Russian media reported. The majority of the cases were filed by various Russian fishing companies that ordered trawlers from Pella but didn’t receive them on time.
One creditor, the St. Petersburg-based Petrobalt Design Bureau, filled a suit against Pella, claiming the shipyard didn’t honor its contract obligations to design the fishing vessel on time. The sum claimed in the lawsuit is more than 10m rubles. A hearing is scheduled for Nov. 23.
“It’s all a big bluff,” said Mathieu Boulègue, a consulting fellow with the Russia and Eurasia Program at Chatham House.
“Forget everything you know about procurement, when it comes to Russia,” Boulègue told Defense News. “They [Pella] can fail, they can be turned into martyrs by the state,” but the company won’t go under because the government needs it as a supplier.
Asked about the future of the Karakut program, he said this latest issue is just one of several production problems with the series. If it’s not the shipyard’s financial failings, it’s a problem securing a part or keeping the production line running, he explained.
Founded in the 1950s and based near the Gulf of Finland, Pella specializes in producing small and medium-size vessels for both civilian and military needs. The company’s main beneficiary is Gerbert Tsaturov, who served as its director since the Soviet era.
During a 2016 defense expo in Russia, senior director Andrei Slizkiy told reporters the company signed a contract to produce seven Karakurt-class missile corvettes. The vessels are equipped with Pantsir missile systems and Kalibr missiles. Russia has used the Pantsir family of missiles against Ukraine, which it invaded in February.
Thus far, the company has delivered three, according to media reports, with the last arriving in 2020. That year, the company reported a turnover of more than 10 bn rubles, according to Spark, a database run by the Russian Interfax news organization. (Source: Defense News Early Bird/Defense News)
25 Nov 22. Mexico: National Guard general killed in Zacatecas sustains risk of armed group attacks. The head of the Zacatecas National Guard, General Jose Silvestre Urzua, was killed in the rural area of Los Pinos (Zacatecas state) during a security operation on 24 November. An unidentified gunman was killed, and three suspects were arrested, while four National Guard members were injured during the operation. Zacatecas has seen a rise in violence in recent months, due to an ongoing turf war between the Jalisco New Generation Cartel (CJNG) and the Sinaloa Cartel. Zacatecas’ current homicide rate hovers around 46 per 100,000 citizens – the third highest in the country. The death of the National Guard’s general will likely lead to a momentary influx of security personnel to the area, though the risk posed by criminal groups is likely to remain stable in the medium term. (Source: Sibylline)
25 Nov 22. Pakistan: New army chief’s appointment will have little impact on unrest risk associated with PTI long march. On 24 November, Pakistan’s Prime Minister Shehbaz Sharif appointed Lieutenant General Asim Munir as Pakistan’s next Chief of Army Staff (COAS). His appointment was without any significant pushback from Pakistan Tehreek-e-Insaf (PTI) leader Imran Khan, indicating that Khan likely hopes to start a new chapter with the army to support his bid for an early election. This is despite his severe criticism of top-ranking officers during his long march campaign, as well as a fallout with Munir in 2019 that resulted in the latter’s transfer from the post of Director of Pakistan’s intelligence agency, the Inter-Services Intelligence (ISI). While outgoing COAS General Qamar Bajwa in his final speech stated that the army planned to remain apolitical going forward, Munir’s appointment will likely rekindle opportunities for back-channel communication between the PTI and the Sharif government in upcoming weeks. In the immediate term, Khan’s long march is still slated to commence tomorrow (26 November), which will sustain a high risk of domestic unrest and clashes in Faizabad, Rawalpindi. (Source: Sibylline)
25 Nov 22. Peru: Cabinet Dissolution.
EVENT
President Pedro Castillo dissolved his executive cabinet on 24 November, after his government interpreted a recent congressional motion as a vote of no confidence. The cabinet reshuffle comes amid a clash between Castillo and Congress, which has attempted to impeach him twice since he assumed office in 2021. Under the Peruvian constitution, two consecutive votes of no confidence in the cabinet would allow the president to dissolve the Congress and call for legislative elections. This would increase political instability and the risk of domestic unrest.
SIGNIFICANCE
- There are currently two congressional motions accusing Castillo of treason and criminal misconduct. If the motions are approved by Congress – which is dominated by right-wing opposition parties – Castillo could be stripped of his current immunity and ousted. Castillo and far left-wing allies have responded by initiating votes of no confidence, which could allow the president to dissolve Congress if the legislature suspends two cabinets in a row.
- Congress has not technically issued a vote of no confidence, however, presidential allies have stated that they interpret recent moves by lawmakers to prevent a vote from being held as the equivalent of a no-confidence ballot. By dissolving the cabinet, Castillo likely concurs with this interpretation and will likely move to hold a second confidence vote in December 2022 or January 2023.
FORECAST
There is considerable uncertainty surrounding the interpretation of recent congressional actions and whether they would allow for the possible dissolution of Congress. This adds to the upwards trend in domestic policy uncertainty since Castillo was elected president in mid-2021. Increased uncertainty will likely impact the current business environment by deterring domestic and foreign investment.
Figure 1: The index determines uncertainty using the frequency of words associated with “uncertainty” in press and intelligence reports. Federal Reserve Bank of St. Louis, 2022.
Separately, it is also possible that the move by Castillo to dissolve Congress would increase domestic unrest in major cities. Castillo and Congress are largely unpopular, however, both are still able to mobilize their bases of support. Opposition parties have the majority of their support in cities concentrated around the eastern coast (e.g. Lima, Trujillo). Historical protest areas in Lima, include: Paseo de los Heroes Navales, Plaza Dos de Mayo, Plaza San Martin, Avenida Abarcay, Campo de Marte, Avenida Guzman Blanco, and Paseo Colon. In contrast, Castillo largely relies on support stemming from rural areas in the southwest. Protests in these areas will likely take the form of roadblocks on thoroughfares. Protesters may burn tires, throw rocks, and damage property. (Source: Sibylline)
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