ALL IN
Australia-Japan alliance, NATO doubts Ukraine offensive, Burry bet $1.6 B on Bidenomic crash, India dedollarises before BRICS, China cuts US T-bills to new low, France-US in post-colonial catch 22,
UPDATE: The Special Strategic Partnership between Australia and Japan extends Japan’s securitisation concept of the Indo-Pacific. The Japan-Australia Reciprocal Access Agreement (RAA) includes training, base access, and logistics.
The lack of progress at on the battlefield, which has been witnessed for months, points to "the reality of a counteroffensive that is struggling to accelerate" according to Stian Jenssen, a senior NATO official.
Investor Michael Burry has bet more than $1.6 billion on a Bidenomics crash. Burry is making his bearish bets against the S&P 500 and Nasdaq 100.
India and the United Arab Emirates have started settling bilateral trade in their local currencies with India's top refiner making payment in rupees for purchase of a million barrels of oil from the Middle Eastern nation.
The Chinese mainland reduced its holdings of US Treasury bonds for a third consecutive month in June to $835.4 billion, dropping to a 14-year low.
The military coup in Niger is already three weeks old. The putschists gained the upper hand in the shadow play with the Economic Community of West African States [ECOWAS] backed by ex-colonial powers ravaging Niger’s mineral wealth.
Australia joins Japan-led alliance
The Special Strategic Partnership between Australia and Japan extends Japans securitisation concept of the Indo-Pacific. The Japan-Australia Reciprocal Access Agreement (RAA) came into effect on August 13 aimed at enabling closer military cooperation, including training, base access, and logistics.
For Japanese Foreign Minister Yoshimasa Hayashi, the RAA would help strengthen cooperation between the two countries. And according to Japanese Prime Minister Kishida, it is a “Landmark agreement that will bring Japan-Australia security cooperation to a new level.”
Obviously, China will not be very happy with the RAA coming into force. The Global Times of China termed the Agreement a formal military alliance that would inflame regional tensions.
Australia and Japan sign a "historic" treaty to deepen defense and security cooperation, a move that hypes the "China threat" and helps the US rope in military alliances to make a "NATO in the Pacific region" to contain China. Analysts said the Pacific Ocean should not become the ocean for some countries to make waves and any attempt to bring harm to China's territory will meet with firm countermeasures.
“By signing the RAA, the strategic and military cooperation between Japan and Australia is becoming more aggressive, which will increase regional tensions and possibilities of military confrontations, bringing danger and instability to the region,” it said.
The RAA is one of the careful peripheral breakthroughs Japan has been making to prepare for revising its constitution, following the act of lifting of the ban on collective self-defense in 2016….Unlike the Quad, which cannot enable frequent mutual military visits, the RAA will expand the forces of Japan to the South Pacific region and promote the full coverage of Japan’s Indo-Pacific Strategy.
It is the first visiting forces agreement Japan has struck with any country after the United States. And Australia is the second country whose armed forces will now be allowed on Japanese soil after the US.
When it comes to practical outcomes, this Agreement will see more training and exercises between the two countries that will include, among others:
Japanese F-35s will deploy to Australia, to RAAF Base Tindal for the first time at the end of August;
Exercise Bushido Guardian, where Australian F-35s will be deployed to Japan for the first time in early September; and,
Australia will participate in Exercise Yama Sakura as a full participant for the first time, with more than 150 personnel traveling to Japan in December.
Some Japanese experts say that in the absence of any NATO-like mutual defense alliance in the Indo-Pacific and the vicissitudes of US politics making future US commitments to Japan’s security unpredictable, Tokyo clearly feels vulnerable vis-à-vis China—and more recently Russia—in relation to territorial disputes and growing military assertiveness in the region, as well as the semi-regular brinkmanship of North Korea.
Australia shares similar geopolitical vulnerabilities regarding China. The RAA, in that sense, is a “minilateral” cooperation between two partners, which could later be expanded with the participation of India, it is argued. According to Femy Francis, and Dhriti Mukherjee of the Bengaluru-based National Institute of Advanced Studies, the RAA aims to look beyond the US-led regional alliance in the Indo-Pacific.
For years the US has navigated through Asian geopolitics by influencing like-minded regional actors. It used these regional players to contest and deter countries like Russia and China. Establishing an alternative security collaboration like the RAA provides leverage for Canberra and Tokyo to negotiate with Washington and Beijing.
However, the conclusion of the RAA did come across some hurdles both in Japan and Australia that needed to be overcome. There were Australian concerns about ADF personnel stationed in Japan being hypothetically subject to capital punishment for serious crimes under Japanese law.
Many in Australia also argued that the issue of the stationing of JSDF personnel on Australian soil needed careful and sensitive handling due to lingering historical perceptions about Japan, especially the 1942 Japanese attacks upon Darwin in the Pacific War. It was felt that the RAA would not only enable the deployment and training of Japanese military personnel in Australia and vice-versa but would also facilitate easier transportation of weapons and equipment for joint exercises and humanitarian missions.
NATO grave doubts on Ukraine offensive
The lack of progress at on the battlefield, which has been witnessed for months, points to "the reality of a counteroffensive that is struggling to accelerate". The recent statement by Stian Jenssen, a senior NATO official, who said that Ukraine could become a NATO member in exchange for abandoning claims for the territories that it refuses to recognize as Russian, suggests there are doubts among Ukraine’s allies that its ongoing offensive will succeed, journalist Gianni Rosini wrote in the Italian newspaper Il Fatto Quotidiano.
Contradictory statements from Kiev’s allies about the Ukrainian counteroffensive have been made for weeks, but the remarks by Jenssen, the chief of staff for NATO Secretary General Jens Stoltenberg, were "testimony that doubts about the Ukrainian offensive have now crept even into the top leadership of NATO."
"The words of Jenssen, which the alliance rushed to downplay after a diplomatic uproar from the Ukrainian government, only confirm a doubt that has been circulating for some time among observers: Do the allies really believe in Kiev’s ultimate victory?" the journalist said.
The lack of progress at the battlefield, which has been witnessed for months, points to "the reality of a counteroffensive that is struggling to accelerate," Rosini said. He suggested "this is perhaps also the reason for the intensification of the Ukrainian attacks across the Russian border."
The Norwegian newspaper VG earlier cited Jenssen as saying Ukraine could join NATO in exchange for ceding the territories that it refuses to recognize as Russian. The NATO official reiterated NATO Secretary General Jens Stoltenberg’s previous statements that Ukraine should decide for itself when and under what conditions it wants to negotiate. When asked if NATO believes Ukraine should give up territory for the sake of peace with Russia and future NATO membership, Jenssen responded that discussions about the post-war status were already underway and the issue of territorial concessions had been raised by others. Jenssen said he didn’t mean that was the way forward but that could potentially be a solution. However, he later stated that his words were part of a broader discussion on possible scenarios for the future of Ukraine and that he should not have said what he said, as it wasn’t right.
Russian Deputy Foreign Minister Mikhail Galuzin said in an interview with TASS earlier that the settling of the conflict required a reaffirmation of the original foundation of Ukraine's sovereignty: its neutral, non-aligned and nuclear-free status. He said "new territorial realities should also be recognised, and efforts must be made to ensure Ukraine's demilitarisation, de-Nazification and respect for the rights of its Russian-speaking people and ethnic minorities in accordance with the requirements of international law."
Read more here.
Burry bet $1.6 billion on Bidenomic crash
By Nicole Goodkind
Michael Burry, the “Big Short” investor who became famous for correctly predicting the epic collapse of the housing market in 2008, has bet more than $1.6 billion on a Wall Street crash. Burry is making his bearish bets against the S&P 500 and Nasdaq 100, according to Security Exchange Commission filings released Monday. Burry’s fund, Scion Asset Management, bought $866 million in put options (that’s the right to sell an asset at a particular price) against a fund that tracks the S&P 500 and $739 million in put options against a fund that tracks the Nasdaq 100.
Burry is using more than 90% of his portfolio to bet on a market downturn, according to the filings. The S&P 500 and Nasdaq 100 have both notched big gains so far this year. They’re up nearly 16% and 38%, respectively.
In the mid-2000s, Burry was famous for placing a wager against the housing market and profited handsomely from the subprime lending crisis and the collapse of numerous major financial entities in 2008.
Burry’s fund is also getting out of its shares in a number of regional banks – it sold its 150,000 shares of First Republic Bank (FRC) as well as holdings in Huntington Bank PacWest (PACW) and Western Alliance (WAL). It’s unclear whether these sales took place before or after JPMorgan Chase took over First Republic Bank (FRC) in May.
Burry also reversed course on Chinese stocks – selling his shares of JD.com (JD) and Alibaba (BABA) in the second quarter of the year.
In financial circles, Michael Burry’s bearish predictions often garner more attention than his optimistic bets.
While one big payoff doesn’t guarantee future returns, Burry does have a strong investment record. Traders following the investments disclosed by Scion’s over the last 3 years (between May of 2020 and May 2023) would have made annualized returns of 56% according to an analysis by Sure Dividend. Over the same period, the S&P 500 had annualized returns of about 12%.
Read more here.
India dedollarises before BRICS summit
India and the United Arab Emirates have started settling bilateral trade in their local currencies with India's top refiner making payment in rupees for purchase of a million barrels of oil from the Middle Eastern nation, the Indian government said on Monday.
Indian Oil Corp (IOC.NS) made payment to Abu Dhabi National Oil Company (ADNOC), according to a statement issued by Indian embassy in UAE.
The transaction comes after one involving the sale of 25 kg gold from a UAE gold exporter to a buyer in India at about 128.4 million rupees ($1.54 million).
India in July signed an agreement with the UAE allowing it to settle trade in rupees instead of dollars, boosting India's efforts to cut transaction costs by eliminating dollar conversions.
During a visit by Indian Prime Minister Narendra Modi to the UAE, the two countries also agreed to set up a real-time payment link to facilitate easier cross-border money transfers.
Bilateral trade between India and UAE was $84.5 billion in 2022/23.
India is keen to push similar local currency arrangements with other countries, as it looks to boost exports amid slowing global trade.
Read more here.
China cuts US Treasuries to 14-year low
By Global Times
The Chinese mainland reduced its holdings of US Treasury bonds for a third consecutive month in June to $835.4 billion, dropping to a 14-year low, data from the US Treasury Department showed on Tuesday local time.
China remains the second-largest holder of US Treasury bonds only after Japan, but it has kept levels under $1 trillion since April 2022. Holdings were cut from August 2022 to February 2023, with a slight pick-up in March of $20.3 billion, before falling again in April.
China's reduction is a long-term strategy and the US has helped cause this trend with its irresponsible policies, which will eventually backfire, experts said. China has been cutting its holdings amid bilateral tensions, aiming to reduce dependence on the US currency while diversifying its offshore assets, Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Wednesday. China will make further reductions but at a moderate pace to avoid market volatility, Xi Junyang said.
Japan, the largest holder, increased its holdings in June to $1.11 trillion from $1.10 trillion in May. The UK remained the third-largest holder, with an increase to $672.3 billion. In June, the total of all net foreign acquisitions of long-term securities, short-term US securities and banking flows reached $147.8 billion. Net foreign private inflows were $119.8 billion, and net foreign official inflows were $28.0 billion, read a statement by the US Treasury Department.
Foreign residents increased their holdings of long-term US securities in June, and net purchases were $244.0 billion. Net purchases by private foreign investors stood at $183.9 billion and net purchases by foreign official institutions came in at $60.2 billion.
An analyst at Fitch Ratings on Tuesday warned that US bank ratings, including JPMorgan Chase, could be downgraded if Fitch further cuts its assessment of the operating environment for the industry, CNBC reported on Tuesday.
Another one-notch downgrade of the industry's score, to A+ from AA-, would force Fitch to reevaluate ratings on each of the more than 70 US banks it covers, analyst Chris Wolfe told CNBC.
Fitch cut the long-term US foreign-currency issuer default rating to AA+ from AAA on August 1. The move reflected expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance, read the statement.
The downgrade won't have a significantly negative impact on the US financial sector, but the potential for future deterioration has already triggered market volatility, Xi Junyang said.
The dominant international status of the US dollar will decline over the longer term as countries seek further currency diversification, and that's another reason some countries are cutting their holdings of US debt, Xi Junyang said.
Read more here.
France-US in post-colonial catch-22
by M. K. Bhadrakumar
The military coup in Niger is already three weeks old. The putschists are cementing their rule, having gained the upper hand in the shadow play with the Economic Community of West African States [ECOWAS] backed by ex-colonial powers ravaging that desperately poor West African state rich in mineral wealth.
The prospects of Niger’s pro-Western President Mohamed Bazoum being reinstated look dim. He is an ethnic Arab with a small power base in a predominantly African country, hailing from the migrant Ouled Slimane tribe, which has a history of being France’s fifth column in Sahel region.
The ECOWAS lost the initiative once the coup leaders defied its August 6 deadline to release Bazoum and reinstate him on pain of military action.
The coup in Niger has been a humiliating setback for France too, and a terrible drama for President Emmanuel Macron personally as he lost his best supporter in Africa for France’s neo-colonial policies. Macron egged the ECOWAS on to invade Niger and rescue Bazoum. He misread the groundswell behind the coup and gambled that Niger’s military would splinter. His overreaction boomeranged as the coup leaders overnight abrogated the military pacts with France. And the latent animosity toward France surged, forcing Macron to cede the leadership to Washington.
Not only France, but western powers on the whole do not understand that the African people have a highly politicised mindset, thanks to the violent, bitterly fought national liberation movements. Unsurprisingly, Africa has been quick to adapt to the space opening up for them in the multipolar setting to negotiate with the ex-colonial masters.
Last Monday, General Abdourahmane Tchiani who is the titular head of the coup, refused to meet the US Acting Deputy Secretary of State Victoria Nuland. Nuland and other US officials asked to see Bazoum in person, but that request was also turned down. Instead, Nuland had to negotiate with the commander of Niger’s Special Operations Forces and one of the leaders of the coup, Brig. Gen. Moussa Salaou Barmou, who serves as chief of defence.
Interestingly, Barmou had attended the US National Defence University and was trained at Fort Benning in Georgia. Obviously, the junta hoped to engage with Washington. The Intercept has since exposed that Barmou was not the only Nigerien general trained by the US who was involved in the coup.
It said, ‘‘Two weeks after Niger’s coup, the State Department has still not provided a list of the US-connected mutineers, but a different US official confirmed that there are “five people we’ve identified as having received [US military] training.” Conceivably, Washington is keeping its cards close to the chest and is keeping the Russians guessing.
The US faces a messy situation in Niger. Its priorities are two-fold — one, block any Russian move to have Wagner fighters replace the French contingent in Niger, and, two, keep its three bases in Niger come what may. If the Biden administration has not formally labeled the military takeover in Niger a coup, it is because such a designation will not permit further security assistance to Niger where the US has a 1100-strong military presence and, more importantly, a drone base, known as airbase 201, near Agadez in central Niger built at a cost of more than $100 million, which has been used since 2018 for operations in the Sahel.
A Reuters report stated, ‘‘One of the US officials said if Wagner fighters turn up in Niger it would not automatically mean US forces would have to leave.’’ The official said a scenario where a few dozen Wagner forces base themselves in Niger’s capital Niamey is unlikely to affect the US’ military presence, but ‘‘if thousands of Wagner fighters spread across the country, including near Agadez, problems could arise because of safety concerns for US personnel… Regardless, the US will put a high bar for any decision to leave the country.’’
In this bizarre shadow play between Washington and Moscow, the US may not push for a military intervention in Niger by the ECOWAS, lest its military presence in Niger becomes untenable. Of course, the coup leaders in Niamey have also been smart enough not to make any demand so far to remove American troops from Niger.
Against this murky backdrop, the US State Department announcement on Wednesday that new American ambassador to Niger, Kathleen FitzGibbon — formerly number two in the embassy in Nigeria — will arrive in Niamey later this week comes as no surprise. It is a signal of Washington’s confidence about continued engagement with the situation. The State Department deputy spokesperson Vedant Patel told reporters that there are no plans for the new ambassador to present her credentials to coup leaders.
Meanwhile, the African Union’s Peace and Security Council, the organ in charge of enforcing the bloc’s decisions, met in Addis Ababa on Monday and rejected an ECOWAS proposal on military intervention in Niger. Several southern and northern African member countries were “fiercely against any military intervention.’’
Taken together, these developments have put the ECOWAS on the back foot. To compound matters, the coup leaders have since announced their intention to to put Bazoum on trial for ‘‘high treason’’ and undermining state security. Interestingly, the military regime claims to have “gathered the necessary evidence to prosecute before competent national and international authorities the ousted president and his local and foreign accomplices.”
Bazoum is being charged following his post-coup exchanges with high-ranking West African politicians and “their international mentors,” whom the coup leaders accuse of making false allegations and attempting to derail a peaceful transition in order to justify a military intervention.
These developments coupled with growing domestic opposition within Nigeria, which heads the ECOWAS currently, has forced appear to be President Bola Tinubu to shift his stance on military intervention. A powerful Nigerian delegation comprising top Islamic clerics travelled to Niger to open talks with the junta, which promptly agreed to dialogue with the ECOWAS on the way forward in the country. With the passage of time, the ECOWAS is losing the initiative which works to the advantage of the coup leaders.
Basically, while poor governance, rampant corruption, escalating poverty and insecurity have created conditions for the coups in Sahel region, a deeper factor is the geopolitics of resource access and control. Foreign powers are competing to explore and control the abundant mineral resources of West African nations.
The ascendant tensions in Niger and the wider subregion are no doubt exacerbated by the geopolitical and economic rivalry between the East and the West. The spectre that haunts West Africa is that the proxy war between Russia and the US can easily creep into Africa, where Russian mercenaries and Western Special Forces are already stationed for new assignments.
Read more here.