The World This Week

Our editors give us a breakdown of this week’s biggest news stories

United Kingdom: Ross Alexander Hutton 

Each day this week new details emerged from Whitehall of the blurred relationships between Former Prime Minister David Cameron, the current government and the financier Lex Greensill. Although it began as an uncomfortable embarrassment for Cameron, as the week progressed the story rapidly developed into a heated controversy at the heart of British politics. At the centre of the storm is the murky question of corruption and lobbying in Westminster – that is, how much power is afforded to those with private interests to influence those in power. In this case, it is the blurred lines between the public and private sector for ministers and former ministers which inevitably lead to conflicts of interest. Lord Eric Pickles, chair of the Advisory Committee on Business Appointments, candidly admitted that “the existing cohort looked after the cohort that just left, on the assumption that the cohort comping up would look after them”. Even though the leader of the opposition Keir Starmer was quick to call out the government for what he believes is a “murkier and murkier picture” such that lobbying is “an open door now in to government”, neither side of the dispatch box can win from a brewing scandal such as this. When politics fails to deliver for the people, it’s the political class who are held responsible – not just the government of the day. 

Far from Westminster, the economic shock of Brexit to the U.K.’s trading relationship with the E.U. appears to be settling. After the slump in cross-channel trade in January, data from the ONS reveal exports to the E.U. bounced back by 46.6% as both sides gradually became accustomed to the new trading regime. As welcome as this ‘bounce back’ is for the economic recovery and to show the initial sticking points are ironing out, there are still real concerns on the ground. While, in theory, the Brexit deal delivered tariff-free access to markets, in practice, frictionless trade is yet to be fully realised by exporters who continue to face unforgiving checks and forms. If the U.K. is to hit the ground running, then complacency in response to the ONS figures will only hinder trading progress. 

Europe: Peter Hourston

Tensions between Russia and the West have been rapidly increasing in recent weeks due to a build-up of Russian military hardware and troops on its border with Ukraine. Reports suggest that Russian military activity is at its highest level since its annexation of Crimea in 2014, with up to 50,000 troops, tanks and heavy weapons amassed near the Russian-Ukrainian frontier. This provoked the imposition of fresh US sanctions against Moscow, the first of the Biden Administration, which led to a sharp selloff in Russian assets, with the rouble falling by two per cent before recovering to trade at 76 roubles to the dollar. Analysts suggested that the measures against Russian debt were quite mild, with Viktor Szabo, investment director at Aberdeen Standard Investments commenting, “The worst expectations did not materialise. It’s unpleasant but it’s not going to do anything to really shake the Russian economy.” However, the tensions between Russia and its neighbours is definitely having macroeconomic consequences. According to Timothy Ash, chief strategist at BlueBay Asset Management, “It’s crystal clear that right now concerns about geopolitics are what’s affecting the rouble.” Ukrainian President Volodymyr Zelensky visited Paris on Friday for talks with French President Emmanuel Macron and a video call with German Chancellor Angela Merkel. In a statement, the German Chancellery said, the three leaders “shared their concern about the increase in Russian troops on the border with Ukraine and in the illegally annexed Crimea” and “demanded a reduction in the troop reinforcements, to de-escalate the situation”.

The pace of the EU’s much criticised vaccine rollout increased this week. In France, the gap between doses was increased to allow more people to benefit from the basic protection offered by a single dose and Germany vaccinated a record 719,000 daily doses in the last week. There has already been some economic consequences to the prospects of a faster recovery from the pandemic, with European bonds coming under pressure.  The German 10-year yield rose to its highest level since the end of February at minus 0.25 per cent, closing the gap between Bunds and US Treasuries, which suffered from their worst sell-off in decades at the start of the year. However, the ECB stepped up the pace of its bond buying programme in mid-March that has, so far, avoided a repeat of the American situation earlier this year in Europe, with the central bank fighting against rising yields and firmly anchoring inflation expectations.  

Africa & Middle East: Camille Capelle 

In the midst of negotiations for a new nuclear deal with Iran, other fences are being mended in the Gulf. Iran and Saudi Arabia are engaging in face to face talks in Iraq, which is now acting as a key mediator in communications between two countries. This second round of talks are a good indicator for an improvement in relations since the breaking of diplomatic relations four years ago. The talks are likely to be a result of US pressure to reduce the conflict in Yemen, which has been especially aggressive in recent weeks, and in which both parties are currently still involved.

This week, US President Joe Biden announced the start of the US & NATO military withdrawal from Afghanistan. After decades of this lingering war of attrition and civilian fighting, the end of the “unwinnable war” now seems closer than ever and putting an end to the cycle of military involvement in Afghanistan. However, some leading military personnel, such as the British Gen. Nick Carter, has voiced their disappointment with Biden’s decision. The withdrawal affects America’s bargaining position in peace talks with the Taliban. Nevertheless, the 10,000 troops are expected to be fully removed by the time of the 20-year anniversary of the 9/11 terrorist attacks. 

North America: Amelia Brown 

President Biden has taken a sharp detour from the previous administration’s cozy relationship with Russia, imposing multiple sanctions on the country after formally blaming them for the SolarWinds cyber attack and other interferences. Sanctions include a ban on US financial institutions trading Russian state debt and other Russian bonds, expelling Russian diplomats, and sanctioning other companies complicit in cyber attacks. Russia is responding in kind, expelling 10 US diplomats and sanctioning other individuals. These moves add tension to a relationship that has been volatile since Biden took office. Talks earlier in the week were looking positive, with Biden and Putin calling to discuss a summit to stabilize relationship–these new sanctions, along with growing concern over Russian presence near the Ukraine border has not set the stage for a smooth de escalation of tension between the two powerful countries. 

On Tuesday the FDA and CDC recommended states to pause using Johnson & Johnson’s single dose covid vaccine after six cases of a rare type of blood clot were reported in women who had recently gotten the shot. The shots were pulled from federal vaccination sites and all states have paused use while they do their own data analysis of the potential safety concern. The shot is likely to resume after a safety review, as the clot was only found in a small subgroup of the population, while more than 6 million Americans have gotten the shot with no serious side effects. However, the pause gives time for health agencies to disseminate information to doctors about how to treat the rare clots, which is different to how a normal blood clot is treated. Even if the J&J shot is shown to be related to the clots and is restricted to those not in a high risk group of complications, Biden assured, “there is enough vaccine […] for every single, solitary American.” 

Canada is having some trouble with vaccination as well: Prime Minister Trudeau announced that Moderna supplies will be millions short of what was expected after production difficulties in their European factories. However, Pfizer, the other approved vaccine in the country, stepped up to fill the supply hole with an additional 8 million doses, with half of those coming in with the May shipment. Trudeau also still feels confident in the ability to vaccinate with at least the first dose every Canadian by the end of June. This is an important goal for the country as it’s facing an increase in cases and deaths. Doug Ford, Ontario’s Premier, extended the stay-at-home order on Friday until at least 20 May. The restrictions were tightened as well as the province grapples with a third wave. 

Latin America: Leo Le Borgne 

Centre-right Guillermo Lasso won the Ecuadorian presidential run-off against left-wing Andres Arauz, disciple of the exiled president Rafael Correa. With 52.42% of the vote Guillermo promised to spearhead the Covid vaccination initiative, and free up the Ecuadorian economy to foreign investors to revive it post-Covid. Analysts suspect that Lasso’s rather surprising victory can be in part attributed to Arauz and Correa’s affiliations with the Cuban government and the likes of Hugo Chavéz and Nicolás Maduro.

As Ecuador experiences a counter-movement towards socialist and left-wing policies, the same test is being applied in Peru’s highly-contested presidential race. Far-left Pedro Castillo, a previous school teacher and union leader, surged in the polls in a dramatic turn of events, placing him first in the preliminary round of voting. With Castillo guaranteed to proceed to the presidential run-off, the vote counting is still undergoing to determine who will face him. Early analysis predicts that right-wing Keiko Fujimori, daughter of the imprisoned ex-president Alberto Fujimori, will claim second place. Trust in Peruvian political institutions is at an all-time low, with decades of political scandals reaching the highest offices of the land. Both Peru and Ecuador have been battered by the pandemic, economic catastrophe, and a series of political corruption scandals. With Ecuador solidifying its faith in neoliberalism under Guillermo, Peru’s election will determine how a fragmented Latin America will navigate the world post-Covid.

Raul Castro, leader of Cuba as the communist party secretary, is stepping down, marking an end to the revolutionary era under the two Castro brothers. President Miguel Diaz-Canel has been nominated as his successor. As in Peru and Ecuador, Cuba is reeling from the symptoms of the pandemic coupled with a crashing economy; the upcoming leadership will have to navigate through many uncertain currents.

Business: Tom Woods 

US-based cryptocurrency exchange Coinbase launched its highly anticipated IPO on Wednesday, sending crypto markets into turmoil.  An IPO, or initial public offering, involves a company offering shares in itself to the public for the first time. Coinbase is ranked as the third largest cryptocurrency exchange in the world, allowing anyone to purchase the hottest properties in the market such as Bitcoin and Ethereum. The IPO was listed on Nasdaq and worth approximately $75.9 billion. Commentators have been quick to label it as a marker of legitimacy for cryptocurrencies, items frequently derided as unrealistic, insecure, or unnecessary. Coinbase enjoyed a champagne 2020 in terms of profits, turning over billions of dollars as investors sought to find a hedge against inflation triggered by increased government spending on recovery from the pandemic. However, its success is largely based on how cryptocurrencies are performing, as reflected by a $30 million net loss over 2019. The announcement of the IPO shook up crypto markets greatly, with commodities such as Dogecoin leaping in price by up to 400%.

UK-based online retailer Ocado has revealed plans to incorporate self-driving vans into its business plan through its connections with tech company Oxbiotica. Ocado, which is listed on the FTSE 100 and has worked with the likes of M&S and Waitrose, just announced that it has invested £10 million into Oxbiotica, which primarily works toward automating supply chains by developing technology that can allow items such as forklifts and vans to operate themselves. In exchange, it is working with the company to completely automate its own supply chain, diminishing costs and maximising profits. Ocado, which is increasingly pitching itself as a tech company rather than a grocer, is seeking to present itself as innovative, and this represents just the latest way it is striving to undercut the competition in this crowded field. The company’s head of technology Alex Harvey said, “we want the entire end to end operation, ultimately, to be autonomous – from the receipt of stock to the warehouse all the way through to the customer’s door”.

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