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ZH Geopolitical Week Ahead – ‘Escalation & No Diplomatic Off-Ramp’

A new weekly round-up of geopolitical flashpoint and energy news we’re keeping our eyes on, and trends impacting global markets, for Premium members and above…

This first week of 2023 has already seen an expected intensifying of escalation combined with no diplomatic off-ramp in Ukraine, especially given Sunday’s unprecedented Ukrainian attack using US-supplied Himars missiles on a Russian conscript barracks in Donetsk. Soon after, in a rare admission given the high death toll, Russia’s defense ministry confirmed 63 fatalities, while Ukraine is alleging some 300 to 400.

But it was a devastating enough attack for rare internal pressure to be placed on the Kremlin, with Russian nationalists now increasingly venting their rage at military commanders for failing in better protecting their troops, and implementing effective defense efforts. Emboldened by this ‘successful’ massive strike, Ukraine is now vowing to conduct “deeper and deeper” strikes inside Russia, according to the Telegraph. All signs continue to point to a ramping up of US involvement, public statements out of Washington to the contrary notwithstanding.

Other trends we are tracking include declining US-Saudi relations, as well as the potential for friction between the United States and the new hard-right Israeli government under Likud leader Benjamin (Bibi) Netanyahu. Both countries, once the closest of all regional friends of Washington, appear to be softening toward Russia… and in the Saudi case, China too.

Another trend and flashpoint going into 2023 will continue to be what some have aptly called the Ukraine-ification of Taiwan, potentially leading to future hot conflict. 2022 saw a record number of Chinese planes buzz the self-ruled island, a tempo only likely to continue. On the energy front, Europe is experiencing a surprise record-setting winter in terms of warm weather and high temps, something which ironically enough has served to blunt Putin’s ‘energy weapon’.

Below are more developments we are closely following this week

Russia-Ukraine War

  • Little hope that 2023 will bring peace, despite some European leaders signaling they want a way out, but Ukraine ‘not in the mood to compromise’ for peace talks: FOX
  • Russia says it has received recent assurances from the US side that the Patriot missile batteries to be sent to Ukraine will not be manned by American personnel on the battlefield: TASS
  • Zelensky says Russia plans to ramp up drone strikes as part of a plan to “exhaust” Ukraine’s population and defenses: AJ
  • Ukraine’s defense minister claims that starting sometime early this month, borders will be closed in Russia, martial law will be declared and a new wave of mobilization will begin: NEXTA
  • Even The New York Times has expressed rare concern over Zelensky’s latest anti-democratic moves, particularly a sweeping press crackdown: NYT
  • Growing anger inside Russia and among Kremlin officials directed at Russian military commanders in wake of one of single deadliest strikes on a Russian base: Reuters
  • Kiev is claiming 400 dead Russians in the attack, reportedly with US-supplied Himars: BBC
  • Russia recently issued new threats to blow up railways, bridges and tunnels in order to halt movement of US weapons: RT
  • Moscow claims its forces destroyed Himars in new strikes: RT
  • Ex-NATO General on Ukraine ceasefire: “I expect a standstill in early summer”: Germany’s Funke media group
  • Ukraine vows “deeper and deeper” strikes inside Russia: Telegraph
  • Ukrainian Orthodox Church (Moscow Patriarchate) holds last service in famous Kiev Caves Monastery: Video

China-Asia

  • China’s warplane incursions into Taiwan air defense zone doubled in 2022, bulk of these after Pelosi’s Taiwan visit: Guardian 
  • America’s longtime ‘strategic ambiguity’ doctrine collapsing? The Hill
  • Both sides continue pledging they don’t want war, as Taiwanese President Tsai Ing-wen is urging Beijing to resume talks: Bloomberg
  • Signaling softer stance? China appoints ambassador to US, Qin Gang, as new foreign minister: The Hill
  • Taiwan’s peace gesture to China – offers pandemic aid amid Covid surge: AFP
  • Foreigners sold a record NT$1.23 trillion last year (New Taiwan dollar), highest amount on record, Taiwan Stock Exchange says: Taipei Times
  • Ongoing disputed border tensions between India & China in Himalayas ensnare cashmere wool trade: WaPo
  • China and Russia increasingly and openly embraced by Saudi Arabia while royals snub US: Insider
  • US in talks with South Korea to manage a nuclear deterrence presence: AP
  • This after Kim ordered ‘exponential’ expansion of nuke arsenal: AP
  • Japan and Russian relations sink to lowest level in decades: Reuters

Middle East

  • CENTCOM released end of the year report indicating US carried out 313 missions in Iraq and Syria against ISIS, killing 686 suspected members: Pentagon
  • Lindsey Graham issues rare criticism of Israel over ‘pro-Russia’ line: TOI
  • Lavrov congratulates new Israeli government in phone call, chummy relations angering Kiev: TOI
  • Israel far-right minister enters Al-Aqsa Mosque in provocation as Palestinian anger mounts: MME
  • Hamas says it ‘Won’t Sit Idly By’: MEE
  • 2022 the deadliest year for Palestinians since 2nd Intifada: MEE
  • Netanyahu wants normalization with Saudis as big Abraham accords summit set for March in Morocco: New Arab
  • Moscow-brokered Syria and Turkey detente on horizon as another summit set: Defense Post
  • But some see major Turkish anti-Kurdish offensive in Syria as still imminent: Al Monitor
  • French warship seized $24 million worth of illegal drugs from a fishing vessel in North Arabian Sea: US Navy
  • Comprehensive new ‘Arab Index’ shows rising anger over sinking economies, poverty and inflation: New Arab
  • 800 Starlinks already in Iran to help the protesters? IranIntl
  • UK To designate Iran’s IRGC as a terror organization: Telegraph
  • Turkey’s inflation actually slowing down, in boost to Erdogan ahead of elections: Al Monitor

Latin America

  • Brazil’s Lula received letter from China’s Xi Jinping expressing desire for increased cooperation: Reuters
  • Notorious gang leader was freed in Mexico prison attack that killed 17: AP
  • Multiple killed in shoot-out as Mexico hunts down 30 inmates who escaped: BBC
  • Bolivia unrest continues after opposition leader’s arrest: AJ
  • Maduro says Venezuela “ready” to work toward normalization with the US: Daily Mail
  • Chevron sending 2 oil tankers to Venezuela under US approval for first time in years: Reuters
  • Soccer legend Pele mourned in Brazil and across the world: BBC

Energy

  • Bulgaria inks long-term agreement to use Turkish gas terminals: AJ
  • Germany halted imports of Russian oil via Druzhba pipeline as of Jan.1: Oil Price
  • UK confirms it stopped importing Russian LNG to stop ‘financing Russia’s war’: EuroWeekly
  • Unprecedented warmer winter for Europe: Russia’s ‘energy weapon’ backfires? Fortune
  • Pressure is on for Russia to accelerate deliveries East: Oil Price
  • EU officials tell Ukraine they’ve stopped 90% of Russian oil supplies: Interview
  • UK: risk of winter power cuts fade as gas prices dip: Guardian
  • But gas crisis to continue as planners look ahead to Winter ’23: BBG

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