Deep Water
Russia recovers Reaper, Cambodia secures coastline, ASEAN rejects AUKUS, are Korea & Japan zero-sum or win-win? Systemic bank risks, $300 billion in 1 week, Speculators attack Euro banks
UPDATE: Russian authorities say Reaper is "the latest confirmation" that the US was "directly participating" in the war in Ukraine. Russia will try to recover the fragments of the US surveillance drone.
PM Hun Sen has urged an end to “baseless” foreign accusations surrounding the development of the Kingdom’s Ream Naval Base. The premier pointed out the “hypocrisy of some foreign powers”, which he said have explained to Cambodia and other ASEAN member states about their nuclear submarine deals. They expect the leaders of ASEAN to listen to them, but do not appear to listen to ASEAN leaders.”
President Yoon Suk Yeol said, improving bilateral relations to respond more effectively to security and economic issues serves the national interests of both South Korea and Japan and is not a "zero-sum" game, but a win-win situation.
A group of 11 lenders says they will deposit $30 billion in the beleaguered midsized lender in an effort to prop it up. The rescue comes after confidence in smaller lenders cratered following the collapse of Silicon Valley Bank and Signature Bank, in what has been an extraordinary week.
Cash-short banks have borrowed about $300 billion from the Federal Reserve in the past week. Nearly half the money went to Silicon Valley Bank and Signature Bank, triggering widespread alarm in financial markets.
Short sellers had amassed bearish positions worth more than US$15.7 billion against European banks, after the collapse of Silicon Valley Bank sparked contagion fears and sent shares plunging, according to S&P Global Market Intelligence.
Russia to Recover Reaper
Russian authorities said that they will try to recover the fragments of a US surveillance drone that crashed into the Black Sea after an encounter with Russian fighter jets. Kremlin Security Council secretary Nikolai Patrushev said Russia would "have to" begin work on a recovery effort."I don’t know if we can recover them or not, but we will certainly have to do that and we will deal with it," Mr Patrushev said."I certainly hope for success." Mr Patrushev said that the drone's presence over the Black Sea was "the latest confirmation" that the US was "directly participating" in the war in Ukraine.
A day after the US drone went down, defence ministers and military chiefs from the US and Russia held rare telephone conversations.
Moscow's defence minister, Sergei Shoigu, told his US counterpart, Lloyd Austin, that American drone flights by Crimea's coast "were provocative in nature" and could lead to "an escalation … in the Black Sea zone".
Russia, "had no interest in such a development but will in future react in due proportion" and the two countries should "act with a maximum of responsibility", including by having military lines of communication in a crisis.
Sergei Naryshkin — head of Russia's SVR foreign intelligence service — told Russian reporter Pavel Zarubin that the United States was "very active" in space, visual and radio reconnaissance in the region.
"We have a detailed knowledge and understanding of the intelligence aims of the United States using technological means, and we try to identify the objects that are of greatest interest to them.”
Sergei Naryshkin, the head of Russia’s foreign intelligence service, said Russia had the technological capability to recover the debris of the MQ-9 Reaper drone from the seabed. Turkey has barred access for warships through the Bosphorus and Dardanelles and the US navy does not have any warships currently in the Black Sea.
Russian ambassador to the US Anatoly Antonov told TASS news agency that Russia would "no longer allow anybody to violate our waters".
Cambodia Secures its Coastline
Cambodian Prime Minister Hun Sen has urged an end to “baseless” foreign accusations surrounding the development of the Kingdom’s Ream Naval Base. The United States has consistently suggested that the base is being expanded to accommodate a Chinese military presence. Cambodia is modernising the naval base with a grant from China. The expansion project broke ground in June last year, in a ceremony presided over by Deputy Prime Minister and Minister of National Defence Tea Banh and Chinese ambassador Wang Wentian.
The project has been criticised by the US, which has alleged for years that Cambodia has permitted a Chinese military present on its territory, despite the fact that such a presence would contradict the Kingdom’s Constitution.
“I have noted that the campaign to discredit Cambodia through false claims about the Ream Naval Base have resumed. I want to remind people abroad that they don’t need to take pictures of the base via satellite or other clandestine means,” he chided.
“We announced the construction and then held a large ceremony to break ground. It is clear that the construction is underway, and it is equally clear that it is not being carried out in secrecy. Nobody should be unduly concerned. The details of the work we are doing are freely available, people just need to ask,” he added.
Hun Sen stressed that there is nothing wrong with the Kingdom seeking to strengthen its defence capacity.
“Cambodia has the right to expand the capabilities of its naval forces. The base was previously just 2.7m deep, and needed to be dredged. This is hardly a threat to any other nation, let alone a superpower,” he said.
“Let me respond to these ‘journalists’. Your brains are clearly weak – you were lucky that you were born in a wealthy country. Because of your limited analytical powers, you just write whatever you feel like, without thinking about it,” he mocked.
The premier also pointed out the “hypocrisy of some foreign powers”, which he said have explained to Cambodia and other ASEAN member states about their nuclear submarine deals, apparently in reference to AUKUS, a trilateral security pact between Australia, the UK and US.
“They expect the leaders of ASEAN to listen to them, but do not appear to listen to the bloc leaders,” he said.
He said he had discussed the issue with the new Australian ambassador to Cambodia, Justin Whyatt, and explained the importance of upgrading the Royal Cambodian Navy’s capacity to protect its sovereign territory, combat illegal drug and human trafficking, prevent illegal fishing, and eliminate other transnational crimes around its maritime border.
Yang Peou, secretary-general of the Royal Academy of Cambodia, said Article 53 of the Constitution explicitly stipulates that the Kingdom maintain permanent neutral and non-alliance policies and co-exist peacefully with all countries.
Peou said the provocations through claims of Chinese military presence may have been timed to coincide with the upcoming July national election.
Read full article here.
Hun Sen: AUKUS is an ASEAN concern
Cambodian Prime Minister Samdech Techo Hun Sen on Thursday expressed concerns over the tripartite AUKUS alliance, a military pact among the United States, Britain and Australia. Under AUKUS, which was formed in September 2021, Australia will be able to build nuclear-powered submarines with technology provided by the other two members.
Hun Sen said ASEAN is a nuke-free zone and called on big countries not to use their power to abuse small ones, saying that mutual respect and non-interference are essential for interstate relations.
"We are thinking with other ASEAN (Association of Southeast Asian Nations) countries. We also express concern," Hun Sen said in a speech at the Build Bright University in Phnom Penh.
"They claim that there is no nuclear (weapon), but if there is nuclear, how will it be?" he said. "Do they agree to allow us to check those submarines? They must not agree."
Joseph Matthews, a senior professor at the BELTEI International University in Phnom Penh, said AUKUS is posing a major security threat to ASEAN and the whole Asian region.
"This alliance will trigger a conventional and nuclear arms race in the region, and thus destabilize the peace and security, undermine the economic development and destroy the ASEAN's centrality," he told Xinhua.
The most vocal of the ASEAN members since the initial AUKUS announcement 18 months ago are Malaysia and Indonesia and while there has been no changing the mind of the former, Jakarta’s official response this week was more low-key even as apprehension remains. The latest to react to the AUKUS announcement are Cambodia and Philippines.
Korea-Japan relations: win-win or zero-sum ?
President Yoon Suk Yeol said, Thursday, that improving bilateral relations to respond more effectively to security and economic issues serves the national interests of both South Korea and Japan and is not a "zero-sum" game, but a win-win situation. He made the comment following his summit with Japanese Prime Minister Fumio Kishida, which was the latest among steps he has taken to improve frayed ties between the two countries.
During the summit, Yoon and Kishida agreed to resume regular visits to each other's countries, while lifting trade restrictions that Tokyo imposed on Seoul against the backdrop of historical disputes. Also, the South Korean president said he agreed with Kishida to resume an intelligence-sharing pact between the two countries, better known as General Security of Military Information Agreement (GSOMIA), to counter North Korea's increasing nuclear and missile threats.
"I declared the complete normalization of GSOMIA at our summit a short while ago," Yoon said at a joint press conference at the prime minister's residence. "I believe the two countries should be able to share information on North Korea's nuclear missile launches and trajectories, and respond to them."
Yoon made the remark after a summit with Japanese Prime Minister Fumio Kishida, referring to the General Security of Military Information Agreement (GSOMIA) that Seoul's previous administration threatened to suspend amid a bilateral dispute over over disputes stemming from Japan's 1910-45 colonial rule of the Korean Peninsula and compensation for Koreans forced into hard labor for Japanese companies.
Signed in 2016, GSOMIA was seen as a rare symbol of security cooperation between Seoul and Tokyo before the former administration of President Moon Jae-in decided to terminate it in 2019 in protest of Tokyo's export restrictions against Seoul.
However, Korea decided to withdraw a lawsuit filed with the World Trade Organization (WTO) over Japan's curbs on three key materials needed to manufacture semiconductors and displays, before the summit. The announcement coincided with Japan's move to lift a four-year export restriction on fluorine polyimide, photoresist and hydrogen fluoride. Japan produces about 90 percent of fluorine polyimide and photoresist and around 70 percent of hydrogen fluoride, which is why local semiconductor industries were left helpless following the export curbs.
Read more here, here and here. Kim Yo-Jong memes here.
Systemic bank risk rises: First Republic rescued by rivals
The biggest banks in the U.S. are stepping in to save First Republic Bank.A group of 11 lenders says they will deposit $30 billion in the beleaguered midsized lender in an effort to prop it up. Bank of America, Citigroup, J.P. Morgan Chase, and Wells Fargo will deposit $5 billion each. Goldman Sachs and Morgan Stanley will deposit $2.5 billion each. An additional $5 billion will come from five other banks. The rescue comes after confidence in smaller lenders cratered following the collapse of Silicon Valley Bank and Signature Bank, in what has been an extraordinary week.
The lenders said in a statement that the action was intended to showcase their commitment to lenders like First Republic Bank."Regional, midsize and small banks are critical to the health and functioning of our financial system," they said.
California-based First Republic has experienced an exodus of depositors since the failures of those two banks, as many of its customers moved their money to larger rivals. That happened even after the lender said it had lined up $70 billion in new financing from both the Federal Reserve and the world's largest bank, J.P. Morgan Chase. First Republic also noted it was eligible to seek additional funding from the Fed if there were heightened demand for withdrawals.
Read more here.
Fed: $300B emergency loans in 1 week
Cash-short banks have borrowed about $300 billion from the Federal Reserve in the past week. Nearly half the money — $143 billion — went to holding companies for two major banks that failed over the past week, Silicon Valley Bank and Signature Bank, triggering widespread alarm in financial markets. The Fed did not identify the banks that received the other half of the funding or say how many of them did so.
The figures provide a first glimpse of the scale of the Fed’s assistance to the financial sector after the two banks collapsed this past weekend. The money was borrowed by banks seeking to raise cash — likely, at least in part, to pay off depositors who tried to withdraw their money. Many mega banks, such as Bank of America, have reported receiving inflows of funds from smaller banks since the bank failures last weekend.
An additional $153 billion in borrowing from the Fed over the past week came through a longstanding program called the “discount window”; it amounted to a record level for that program. The Fed has lent an additional $11.9 billion from a new lending facility it announced on Sunday. The new program enables banks to raise cash and pay any depositors who withdraw money.
Larry Fink, the chief executive of Blackrock, said the recent failure of Silicon Valley Bank, Silvergate and Signature Bank in the US could be the start of a “slow, rolling” crisis that may see others fail.
Speculators build $16 billion bearish bet on Europe's banks
Short sellers had amassed bearish positions worth more than US$15.7 billion against European banks, after the collapse of Silicon Valley Bank sparked contagion fears and sent shares plunging, according to S&P Global Market Intelligence. The data did not cover the drop in Credit Suisse shares on Wednesday, which fell by as much as 30% at one point after its top shareholder said for regulatory reasons it could not inject more capital into the bank.
Traders with short positions on Credit Suisse could, according to market prices, potentially have made month-to-date profits of up to $238.6 million and year-to-date profits of up to $192.4 million, research from S3 Partners showed.
BNP Paribas shares fell by as much as 12% on Wednesday before recovering to show a loss of 9%, while Deutsche Bank shares fell almost 9%. In the week to Wednesday, some 120 billion euros ($126 billion) had been wiped off the value of European bank shares.
Big hedge funds including Marshall Wace and Odey Asset Management added to short positions against Europe's banks. Marshall Wace held the largest disclosed number of short positions against banks, public filings from Austria, Italy, Sweden, Britain, Spain and Poland. The banks included BAWAG, FinecoBank, Handelsbanken, CaixaBank, NatWest Group and PKO Bank Polski. Handelsbanken, Mediobanca, BNP Paribas, Credit Suisse, Close Brothers, Deutsche Bank were among financial firms with the highest proportion of shares on loan to short sellers, according to S&P Global Market Intelligence.
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