Jul 13, 2020

Axios World

By Dave Lawler
Dave Lawler

Welcome back to Axios World.

  • In tonight's edition: China is putting money into Iran, and mafiosos in Italy are coming up with new ways to get their money out. Tonight's newsletter won't cost you a dime, but it will take around 6.5 minutes of your time (1,740 words).
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Situational awareness: The State Department announced Monday that it rejects most of China's territorial claims in the South China Sea. Go deeper.

1 big thing: China's blockbuster deal with Iran

Illustration: Aïda Amer/Axios

China and Iran have negotiated a deal that would see massive investments flow into Iran, oil flow out, and collaboration increase on defense and intelligence.

Why it matters: If the proposals become reality, Chinese cash, telecom infrastructure, railways and ports could offer new life to Iran’s sanctions-choked economy — or, critics fear, leave it inescapably beholden to Beijing.

  • The deal has not yet been finalized, but both sides acknowledge it’s in the works (though China has been more circumspect).
  • A leaked draft envisions Chinese-built "airports, high-speed railways and subways," as well as "free-trade zones" in regions of Iran, per the NYT. The deal extends to cyberspace — with China offering "greater control over what circulates" — as well as to defense.
  • The projects total an eye-watering $400 billion over 25 years.

Reality check: If that figure sounds implausibly high, that’s because it probably is.

  • “This sounds like a wish list of all the projects that could conceivably be in play, rather than a realistic estimate of anything that China’s been able to do anywhere,” says Andrew Small of the German Marshall Fund’s Asia Program.
  • China is already “running into problems in innumerable locations trying to do project clusters on a much smaller scale than this,” Small says, referring to elements of China’s Belt and Road Initiative.

Between the lines: Both sides have clear incentives here: China locks in a cheap oil supply and deepens its strategic links in the Middle East, while Iran — which has virtually nowhere else to turn for foreign investment — gets economic benefits and a big flashing sign that it’s not as isolated as America claims.

  • But such a dramatic bet from Beijing would be a surprise. It's been dialing back on controversial Belt and Road mega-deals, has historically been careful to balance its relationships in the Middle East (including with Saudi Arabia), and may see uncomfortable parallels with Venezuela, which can't pump enough oil to cover its debts to China.
  • Meanwhile, while Iran does need Chinese cash, Tehran has found recent reliance on China "a painful experience" and "they absolutely don’t want to have the economy so beholden to the Chinese over that kind of time frame," Small says.

The latest: Domestic critics are already sounding the alarm in Iran, with former President Mahmoud Ahmadinejad accusing the government of handing Iran's “purse to other countries without informing the nation."

  • Foreign Minister Mohammad Javad Zarif defended the deal, while denying that Iran would offer discounted oil or sell Kish Island, as some critics had claimed.

What to watch: Even if only a fraction of what has been proposed comes to fruition, this a clear challenge to the Trump administration's "maximum pressure" campaign toward Iran, and another sign of America's geopolitical foes aligning.

Flashback: Tuesday marks the five-year anniversary of the Iran nuclear deal. While President Trump is nowhere near replacing it with a broader deal, a potential President Biden would also struggle to wind the clock back to 2015 and put a deal back together again.

2. Europe: Electoral fault lines
Adapted from Europe Elects; Chart: Naema Ahmed/Axios 

1. President Andrzej Duda was re-elected Sunday in the tightest election in modern Polish history, with 51% of the vote to 49% for Warsaw Mayor Rafal Trzaskowski.

Why it matters: The populist ruling party, Law and Justice, is now expected to press ahead with steps that critics say are eroding the independence of the courts and media, and have brought Poland into conflict with the EU.

  • The election was fought on culture wars. Duda claimed Trza­skowski would allow homosexual "ideology" to take hold in Poland, while the government-aligned state broadcaster warned that Trzaskowski could allow Jew­ish peo­ple to reclaim assets taken during the Holocaust.
  • Breaking it down: Trzaskowski, a centrist Europhile, dominated in cities, in more affluent western Poland, and among younger voters. Older voters overwhelmingly backed Duda.

2. Crackdowns ahead of Belarus' Aug. 9 election are making it harder for Western governments to cozy up to Pres­i­dent Alexan­der Lukashenko.

  • Lukashenko, occasionally called "Europe's last dictator," recently rebuffed Vladimir Putin over military ties and ruled out a potential Belarus-Russia commonwealth.
  • Those moves were applauded by the West, and the EU and U.S. have both eased sanctions.
  • What to watch: After disregarding the threat from COVID-19, Lukashenko has responded to a surge in popular discontent with force and intimidation. There's talk in Brussels of new sanctions, but also a wariness of pushing Lukashenko back toward Putin.

3. North Macedonia is holdings its first election this week since adding "North" to its name — a historic concession to Greece that paved the way for NATO membership but instantly became a political fault line in the Balkan country.

  • Prime Minister Zoran Zaev resigned in January after a lack of progress on EU accession talks.
3. Coronavirus: What went wrong in the U.K.

Illustration: Sarah Grillo/Axios

One country was easily the best-prepared in the world to respond to an epidemic, according to the 2019 Global Health Security Index: Great Britain.

Reality check: When the coronavirus struck, the U.K. had arguably one of the least effective responses among rich countries, despite decades of preparation for just such an event. Its death toll ranks behind only the U.S. and Brazil.

The big picture: Prime Minister Boris Johnson has been heavily criticized for failing to prioritize the virus early on, and his scientific advisers came under fire for initially rejecting the idea of a lockdown.

  • Since then, the government has been criticized for not ramping up testing capacity quickly enough and for its struggles on contact tracing.

What went wrong: Jeremy Hunt, who served as the U.K.'s health secretary from 2012 to 2018 and now chairs the parliamentary Health and Social Care Select Committee, ran a "huge tabletop exercise" to simulate a pandemic over three days in 2016.

  • That produced a series of recommendations, Hunt told the FT's Payne's Politics podcast. None of them had to do with testing capacity or PPE, because the U.K. was basing its preparations on pandemic flu, Hunt says.
  • When a real-life pandemic struck, the scientific body that advises the government proposed either a herd immunity strategy or lockdown. Test-and-trace wasn't considered.
  • "There was a kind of groupthink in our approach to pandemics that had conditioned us all to think that the way you respond to a pandemic is the way you respond to a flu," he says.

Between the lines: The U.K. had years of preparation to call upon, but it could have also looked around the world and learned from best practices elsewhere.

  • "South Korea was doing what it was doing in January and February, but it wasn't until April that [the Scientific Advisory Group for Emergencies] started to model" that approach, Hunt says.
4. Global news roundup: Testing and protesting

Protesters gather in Bamako, Mali. Photo: Michele Cattani/AFP via Getty

1. Several Indian cities and states have reimposed lockdowns as the country continues to set daily records for new cases.

  • Among those infected is Bollywood legend Amitabh Bachchan. His decision to disclose his illness may help reduce the stigma that has hindered testing and contact tracing.

2. South Africa is reintroducing a nationwide ban on alcohol sales, on the grounds that alcohol-related incidents take up hospital beds that are needed to treat the coronavirus.

  • South Africa has recorded 52,000 cases — nearly one-fifth of all those recorded during the pandemic — over the last four days alone.

3. Several protesters were killed in Mali over the weekend amid a standoff that could bring down President Ibrahim Boubacar Keïta.

  • Protesters forced the national broadcaster off the air on Friday and attempted to storm several government buildings. They're angry about the government's failure to defeat a jihadi insurgency and fix the economy, as well as a disputed election in March.
  • A conservative imam, Mahmoud Dicko, is the key figure in the opposition. He's now calling for calm but demanding more concessions, while Keïta alternates between conciliatory gestures and shows of force.
5. What a Biden foreign policy would look like

Photo illustration: Sarah Grillo/Axios. Photo: Bastiaan Slabbers/NurPhoto, and Bastiaan Slabbers/NurPhoto via Getty Images

Foreign policy will look drastically different if Joe Biden wins in November, advisers tell Axios' Hans Nichols — starting with a day one announcement that the U.S. is re-entering the Paris Climate Agreement and new global coordination on the coronavirus.

The big picture: If Trump's presidency started the "America First" era of withdrawal from global alliances, Biden's team says his presidency would be the opposite: a re-engagement with the world and an effort to rebuild those alliances — fast.

Driving the news: Biden advisers who watched the 2008–09 financial crisis consume Obama’s early days say that, similarly, the domestic coronavirus crisis will demand much of the next administration’s attention.

  • “Job one will be to get COVID under control,” said Tony Blinken, Biden’s longtime foreign policy adviser.
  • Beyond the obvious health implications, team Biden is concerned about a potential global food crisis, security vulnerabilities, worldwide depression and a debt crunch in emerging markets.
  • The flipside: "There's a lot of low hanging fruit, like shoring up alliances," said Derek Chollet, a State and Defense Department official in the Obama administration. “Joe Biden is really good at relationships and alliances."

Don't forget: In July 2008, Obama did a world tour promising to end the Bush administration's foreign policy approach and embrace multilateralism.

  • The pandemic has ruled out globetrotting for Biden this summer, but his foreign policy approach looks similar.

Between the lines: Biden and Obama did have serious policy differences, including on Ukraine, Libya, Afghanistan and the Arab Spring.

Go deeper, including on the key players in Biden's foreign policy orbit

6. What I'm reading: Italian mafia goes global

The Carabinieri on the scene of a mafia ambush. Photo: Alfonso Di Vincenzo/Kontrolab/LightRocket via Getty

I must have thought "that can't be right" at least a half dozen times while reading the FT's remarkable investigation into money laundering by the Calabrian mafia, the 'Ndrangheta.

Driving the news: Revenues generated by the mafia, including from corrupted hospital systems, were packaged into bonds and sold to unwitting international investors, to the tune of €1 billion ($1.1 billion) from 2015 to 2019.

More key points:

  • The estimated annual revenues from the various 'Ndrangheta clans are €44 billion ($50 billion) — which would put the 'Ndrangheta somewhere between Morgan Stanley and Delta Airlines in the Fortune 100. That turnover is also higher than all the Mexican cartels combined, per the FT.
  • Much of that money comes from the drug trade, but the mafia has infiltrated nearly every aspect of life in Calabria, Italy's poorest region.
  • Zoom in: Mafia-linked funeral companies will sometimes arrive at hospitals before family members are even notified of a death. There's little choice of whether to use their services.

The big picture: The 'Ndrangheta are hard to infiltrate and prosecute in part because of their ruthlessness, but also because the autonomous clans operate without central leadership, and membership is largely based on blood ties.

  • A new globetrotting generation — armed with MBAs from some of the world's best universities — is helping what had been gangs of "rural bandits" move assets all over the world.

Dive in

7. Stories we're watching

The Milky Way hangs over ski season in Charlotte Pass, Australia. Photo: Bill Blair/Getty Images

  1. Turkey converts Hagia Sophia into a mosque
  2. Trump rules out Phase 2 China trade deal
  3. China bans Cruz and Rubio over Xinjiang criticism
  4. First female Green Beret
  5. Coronavirus surge punctures oil's recovery
  6. How Europe’s green recovery will push the rest of the world
  7. Notre Dame restoration goal: re-create the original

Quoted:

"Nobody caught it in Spanish, but it's as good as it gets — basically an endorsement."
— Source close to the Trump campaign on plans to use footage from Mexican President Andrés Manuel López Obrador's White House visit in ads targeted at Hispanic voters.
Dave Lawler

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