Month: May 2024

Authored by Ven Ram, Bloomberg cross-asset strategist,

The Swiss franc has had a twin life so far this year, weakening against the dollar and the euro, but proving to be resilient against the yen. 

That double role may persist so long as real rates in the US stay aloft.

This is broadly how the franc has performed this year:

Outlook against the dollar:

The franc has been hobbled against the dollar and the euro, with higher nominal and inflation-adjusted yield differentials proving to be a particular handicap against the US exchange rate. Against the dollar, the franc will continue to be on the back foot so long as real rates in the US stay higher for longer. The Swiss National Bank is perturbed sufficiently by the prospect of weakness in the franc stoking domestic inflation as to warn that it might intervene in the currency markets.

Indeed, the franc has recovered some 0.6% on the day on the back of SNB President Thomas Jordan’s comments. While the SNB may be willing to put a floor on the franc, it’s unlikely that it will be able to turn the tide entirely on what is a broader dollar move.

The franc will claw its way back against the dollar when signs emerge that a rate cut from the Federal Reserve is imminent, but we aren’t yet at that point.

Outlook against the euro:

The euro is also better placed against the franc given that nominal rate differentials between the euro zone and Switzerland will continue to work in favor of the former in the months to come.

Traders are factoring in about 60 basis points of policy loosening from the European Central Bank this year, though as noted before, there is a chance that we could get only two cuts. The carry on a long euro position against the franc is, therefore, bound to be significant, which will deter gains in the Swiss currency. Even with Jordan’s warning echoing in the background, EUR/CHF isn’t too far from parity.

Outlook against the yen:

The franc has proved more resilient against the yen than I expected it to be, though the bulk of that performance has stemmed from carry returns. An investor who is long the franc against the yen is essentially getting paid to put on the trade, which has underpinned the spot move in CHF/JPY so far this year.

The broader yen is dogged by immense gloom, which has sent Japan’s exchange rate tumbling a lot lower than it ought to have. While the franc may yet stay supported against the yen, traders will find that the carry that is enticing them won’t be sufficient to buffer the cross when broad sentiment toward the yen turns.

At least 735 million people were affected by hunger in 2022, according to the most recent report from the Food and Agriculture Organization of the United Nations (FAO).

And as Statista’s Martin Armstrong reports, nowhere does the problem have a larger scale than on the African continent. According to FAO, about 61 percent of the population there was experiencing moderate (including not enough money for healthy food, self-sufficiency problems, having to skip meals) or severe (including no food stocks, entire days without food) food insecurity (FAO’s definition). This represents an increase of 9.4 percentage points from 2017, and 4.9 points higher than the first Covid pandemic year.

You will find more infographics at Statista

Other world regions have seen a dip or plateau in hunger levels since the start of the pandemic, which caused widespread increases due to “an unequal pattern of economic recovery among countries and unrecovered income losses among those most affected by the pandemic”. Africa though has experienced an unabated rise.

Looking ahead, the FAO expects “most progress to occur in Asia, whereas no progress is foreseen in Latin America and the Caribbean, and hunger is projected to increase significantly in Africa by 2030.”

Authored by Andrew Korybko via Substack,

President Putin shared a lot of insight about the NATO-Russian proxy war in Ukraine during the press conference that he held during his latest trip to Uzbekistan. The first point of relevance that he made is that Zelensky is no longer regarded by Russia as Ukraine’s legitimate leader after his term expired. According to President Putin’s “tentative estimate” of this legal question, Rada Speaker Stefanchuk should now be seen as Zelensky’s legal successor.

The Russian leader also speculated that the only reason why the incumbent remains in power is for him to carry out scandalous moves like possibly lowing the draft age to 23 and even 18 years. In his words, “I believe that after this and other unpopular decisions are made, those who are acting today as representatives of executive government would be replaced with people who would not be responsible for the unpopular decisions made. These representatives will be simply replaced in a snap.”

Moving along, in response to a question about NATO chief Stoltenberg’s suggestion for members to let Ukraine use their arms to hit targets inside of Russia like the US just tacitly approved of Kiev doing, he reminded everyone that long-range precision strikes require space reconnaissance data. Since Ukraine lacks these capabilities, such strikes can only be carried out with NATO support, including through instructors inside Ukraine masquerading as mercenaries for plausible deniability purposes.

President Putin advised the West to think twice about this and then addressed Russia’s fresh push into Ukraine’s Kharkov Region, which he confirmed was in response to the shelling of Belgorod and aimed at carving out a “security area” exactly as he earlier warned he’d order if those attacks didn’t stop. On the topic of Belgorod, he lamented that the Western media doesn’t report on Ukraine’s strikes there, and hinted that his envisaged “security area” could expand to stop longer-range attacks if need be.

He was later asked about Ukraine inviting French “instructors”, to which he responded by saying that his forces regularly “hear English, French, or Polish on the radio” when listening in their opponents, thus confirming that their mercenaries have long been deployed there. Of those three, President Putin believes that the Polish ones are the least likely to leave, which is an allusion to Russian officials’ prior claims that it plans to annex Western Ukraine or at least incorporate it into a sphere of influence.

As for how he sees everything ending, he reaffirmed his commitment to peace talks and reminded everyone that it’s Ukraine that unilaterally froze this process, not Russia. Mid-June’s upcoming “peace talks” in Switzerland are only designed to “create a semblance of global support” for the West’s unilateral demands of Russia aimed at inflicting a strategic defeat upon it. Suffice to say, President Putin promised that this won’t succeed, and he concluded by saying that it’ll only be more painful for Ukraine.

Reflecting on his remarks, the Russian leader signaled that he’s sincerely interested in peace but is also preparing for an escalation in the conflict since NATO’s latest moves suggest that it’s still disinterested in compromising. The US is using Zelensky as its figurehead for implementing unpopular decisions aimed at indefinitely perpetuating this doomed conflict, after which it’ll likely replace him with someone else once public opinion demands it.

Even in that scenario, however, it’s unclear whether another Ukrainian regime change would precede the recommencement of genuine peace talks that ensure Russia’s national security interests. President Putin’s words about Poland came amidst it expressing support for using Western arms to strike targets inside of Russia, countenancing shooting down missiles over Western Ukraine, and repeating its position that a conventional intervention in that neighboring country can’t be ruled out.

From the looks of it, Poland is indeed preparing to conventionally intervene in Ukraine if Russia achieves a military breakthrough, which could spike the risks of World War III by miscalculation due to the US’ dangerous game of nuclear chicken that it’s playing as explained here. In sum, the NATO-Russian security dilemma is spiraling out of control, and Russia might use tactical nukes in self-defense to stop any large-scale NATO invasion force that threateningly crosses the Dnieper towards its newly unified regions.

Therein lies the importance of President Putin hinting that his country might expand its “security zone” to defend against Ukraine’s use of long-range precise strike systems against targets within its pre-2014 territory. He wants NATO to know the territorial extent to which Russian forces might go in the event that the front lines collapse, which is essentially dependent on them and their decision to allow it to use such Western arms with the bloc’s space reconnaissance support.

The message being sent is that Russia has no interest in going beyond those geographical limits that NATO itself is responsible for setting through its abovementioned decision, which is meant to prevent the bloc from overreacting if their opponents achieve a military breakthrough. A Polish- and/or French-led conventional intervention would already be dangerous enough, but that invasion force’s potential crossing of the Dnieper could trigger a tactical nuclear response from Russia in self-defense.

The latest military-strategic dynamics suggest that a conventional NATO intervention is seriously being considered, even if it’s only a partial one that remains west of the Dnieper. The signals coming from NATO as a whole and Poland in particular show that they want an escalation in order to continue fighting Russia to the last Ukrainian, but President Putin just countersignaled that his country is prepared for all eventualities.

It’s therefore up to the West whether or not everything spirals into World War III.

Authored by Jeffrey Tucker via The Epoch Times,

There are three layers to the U.S. state that lord it over the American people and the world: deep, middle, and shallow. It’s a typology of how technocracy works in practice. Let’s talk about how it works and how the layers interact.

Donald Trump popularized the term deep state, and it is a good one. There is a large and serious literature on the topic. It refers mostly to the long-operating and largely out-of-public eye intelligence agencies and their cut-outs in the private sector. It is inclusive of security agencies, which means CIA but also some portions of the FBI, NSC, NSA, CISA, DHS, top brass at the Pentagon, and more besides.

They are the most powerful force in American politics and have been for many decades. Anyone who calls them out is called a “conspiracy theorist” simply because there is a lack of documentation for these claims that everyone knows are true. They are “classified,” Washington’s magic term for anything they want to hide from you.

Lately, there has been an opening up on this topic, thanks very much to Robert F. Kennedy, Jr., Trump, journalist Mike Benz, and many others who have worked so hard over the years to expose the cabal. This new attention is mostly due to a series of audacious plots that unfolded since 2016: the bogus claim of Russia interference in the election, as manufactured by the deep state, the surreptitious weaponization of the justice system still ongoing, as well as the pandemic policies that had deep-state fingerprints all over them.

The middle state is the administrative bureaucracy, the civil service, as they are called. Invented by the Pendleton Act of 1883 and growing through wars and crises, and deeply entrenched in the 21st century, it is more than 2 million strong and consists of more than 400 agencies, some innocuous and some deeply threatening. Elected politicians only pretend to control the middle state but the reality is the opposite. They are the people with permanent positions, institutional knowledge, and the focus to preserve the status quo no matter who shows up in town for the party.

Very often, newly elected politicians come to town naively hoping to make some difference. They quickly encounter an awesome and impenetrable force all around them, staffers moving from office to office, random people from agencies about which they have never heard, and attending briefings designed to introduce the newbie to the ways of Washington but which are really designed to intimidate them into compliance. Most newly elected leaders arrive with no real understanding of this system.

This is what Trump faced when he was elected. He believed that the president was supposed to be in charge, like a CEO or an owner of a company. That’s the only world he knew, one in which he was at the top of the heap and his word was a marching order. He figured that this day would arrive after the inauguration. It did not. He simply couldn’t get over it and never was willing to simply play the marionette as others had done, in exchange for plaudits and payoffs.

Once Trump figured it all out, he assigned his trusted staff to do something about it. He issued a series of executive orders to get the middle state under control. In May of 2018, he took his first steps to gain some modicum of control over this deep state. He issued three executive orders (E.O. 13837, E.O. 13836, and E.O.13839) that would have diminished their access to labor-union protection when being pressed on the terms of their employment. Those three orders were litigated by the American Federation of Government Employees (AFGE) and sixteen other federal labor unions.

All three were struck down with a decision by a D.C. District Court. The presiding judge was Ketanji Brown Jackson, who was later rewarded for her decision with a nomination to the Supreme Court, which was affirmed by the U.S. Senate. The prevailing and openly stated reason for her nomination was said to be mostly demographic: she would be the first black woman on the Court. The deeper reason was more likely traceable to her role in thwarting actions by Trump which had begun the process of upending the administrative state. Jackson’s judgment was later reversed but Trump’s actions were embroiled in a juridical tangle that rendered them moot.

Later came a wonderful executive order that would have reclassified a range of middle-state employees as “Schedule F” and thus subject to control by the elected president. That order caused Washington to fly into wild panic. Joe Biden reversed the order on his first day in office. They have had four years now to pass restrictions to prohibit that from happening again.

As recently as last week, Biden’s Office of Personnel Management finalized rules to make it difficult for Trump to strip civil servants in policy making roles of their permanent positions. Yes, the plot against a possible second Trump term is fully engaged already.

The third layer is the shallow state. It consists of legacy media outlets such as CNN, the New York Times, the Washington Post, MSNBC, in addition to social media companies like Facebook, LinkedIn, Reddit, as well as common internet tools like Google and Wikipedia. It includes military contractors and tax-supported academia as well.

These are all captured institutions, with revolving doors with the deep and middle states. The reporters at these large media outfits have close relationships with the top bureaucrats at the agencies they cover, which is why the agencies themselves are rarely investigated closely.

When lockdowns came, Facebook and all the mainline social media companies instantly signed up to be both propagandists and censors. When they worried about the impact on their business models, middle and deep state bureaucrats hounded them to step it up and serve their masters. They mostly complied. We know all this by virtue of tens of thousands of pages of correspondence that is now moving through the courts, possibly resulting in judgments that would bring back the First Amendment.

The shallow state also includes a major swath of the banking and financial sector that depends fundamentally on the benevolence of the middle-state Federal Reserve to provide an uninterrupted stream of liquidity to fuel its operations. In some sense, the entire system mapped out here depends on this funding source, without which the lockdowns, wars, welfare state, and enormous corporate subsidies (to pharma, agriculture, and the Green New Deal) could not and would not exist.

What is and isn’t included in the shallow state is obviously debatable on many levels. What about an institution that massively benefitted from lockdowns, such as Amazon, but didn’t actively lobby for the policy? How does the fact that its founder and major investor also owns the Washington Post which did push for lockdowns affect the judgment? And what about online learning companies that got rich solely due to school closures? Are they also shallow state? There are good discussions to have here.

The relationship between the three layers is perfectly illustrated in the way pharmaceutical companies work. They do the bidding of the deep state with biodefense work that is classified, making both pathogens and antidotes. They work with the middle state, with board members and managers of companies going back and forth with the NIH and FDA, sharing royalties on new patented consumer products. The companies then dominate advertising on all the main media venues, which means that the media covers up for them at every turn and echoes deep and middle state priorities.

If you are seeking to set up and manage a 21st-century technocratic regime, the ideal mechanism of compulsion and coercion is centered in the shallow state, because it is private, consumer-facing, and trusted more than any other layers of the state. Every form of coercion can be “market washed” as if these are purely private actions taking place. The strategic objective of any really good plan for hegemony, then, is to push the agenda from the deep state, through the middle state, and land in the shallow state for distribution to the public.

This is because the shallow state is the most effective tool for bringing about results. You want the large corporations and big finance to be the ones to move against political enemies, and you want the major media rather than the agencies to distribute the propaganda. You want the doctors to sell the drugs and the search engines to generate the message. Whatever trust remains is centered on these shallow-state institutions and therefore they are the ones you want to capture to do your bidding.

Yes, it all sounds very corrupt. It is. And it has absolutely nothing to do with this document called the Constitution, which is supposed to be the real law of the law. For the three-layer state, this document simply doesn’t matter. A quiet coup has taken place over the decades that has entrenched this wild system in contradiction to everything the Founding Fathers desired.

All three are right now plotting to resist a possible victory by Donald Trump in November. The notion that he would win in 2016 seemed outlandish. But the prospect of returning after a four-year hiatus to gain the presidency again is nearly miraculous. In any case, it is something no one imagined possible a few years ago.

Indeed it is easily one of the biggest political comebacks in history, and amounts to the closest thing we’ll likely ever see to a genuine revolution in modern times. What comes of it, we’ll have to find out but this much is clear: the whole of the three-layered state has done everything to stop it. Right now, the whole system is in complete freak-out mode, in full display of the whole world.

There is plenty of reason to doubt aspects of the Trump agenda. I’ve personally authored what is by now a large literature against features of the ideology that drives it.

But there is no getting around the real issue today. We are nearing a perfect battle between the people, who are supposed to rule or at least have some line of influence over the regime, and this three-layer cartel of overlords that is actually in charge.

No one who aspires to freedom and dignity can possibly defend this status quo, so it makes sense to look forward to its overthrow, if it is at all possible.

Two weeks after the latest CPI print came in fractionally below estimates and sent yields to their May lows, tomorrow at 8:30am, we will get the Fed’s preferred inflation metric, the April core PCE inflation numbers.

EXPECTATIONS: headline PCE prices are seen rising +0.3% M/M in April (prev. +0.3%), with the annual rate expected to be unchanged at 2.7%. The core measure is seen rising +0.3% M/M (prev. +0.3%), while the core rate of annual PCE is seen unchanged at 2.8% Y/Y, although even a modest dip in the annual print would lead to the lowest annual increase in three years, since April 2021.

CPI AND PPI: As noted above, and as Newsquawk writes in is PCE preview, headline CPI data was cooler than expected in April, while the core CPI metric saw the smallest increase since December; and while the PPI data for the month surprised to the upside in the month, analysts noted that the internals — components that feed into the PCE data – were more constructive (insurance sectors, health and medical components, air transportation). As a reminder, PCE gives far lesser weight to Housing/Shelter, as well as transportation (recall that transportation insurance is soaring right now and is the biggest drive of CPI inflation), which is why overall core inflation viewed through the lens of PCE is far lower.

Ahead of the data, Goldman Sachs said using CPI, PPI and import prices, “we estimate that core PCE increased 0.26% M/M, a pace well below the 0.36% average of the prior three months, but probably not sufficient for a July cut if maintained in May and June.” That said Goldman estimates that the market-based core PCE index—which has been referred to by Fed Chair Powell in recent remarks—rose just 0.18%, a pace GS says would be quite consistent with a July cut if maintained.

FED: After a hawkish set of FOMC meeting minutes, and some cautious chatter from Fed officials, as well as constructive incoming data (decent PMI data for the month saw Fed cut pricing diminish sharply); money markets are pricing no easing at the Fed’s June 12th meeting, and only a 10% chance of a cut in July. The first fully discounted rate cut is seen in December, although markets are assigning a c. 80% probability of a cut in November. Goldman recently pushed its first rate cut forecast from July to September.

Since 1980, there have been 383 extreme weather or climate disasters where the damages reached at least $1 billion. In total, these disasters have cost more than $2.7 trillion.

Created in partnership with the National Public Utilities Council, this chart, via Visual Capitalist’s Jenna Ross, shows how these disasters have been increasing with each passing decade.

A Growing Concern

The U.S. National Oceanic and Atmospheric Administration (NOAA) tracks each disaster and estimates the cost based on factors like physical damages and time losses such as business interruption. They adjust all costs by the Consumer Price Index to account for inflation.

Both the number and cost of extreme weather disasters has grown over time. In fact, not even halfway through the 2020s the number of disasters is over 70% of those seen during the entire 2010s. 

Severe storms have been the most common, accounting for half of all billion-dollar disasters since 1980. In terms of costs, tropical cyclones have caused the lion’s share—more than 50% of the total. Hurricane Katrina, which made landfall in 2005, remains the most expensive single event with $199 billion in inflation-adjusted costs.

Electricity and Extreme Weather Disasters

With severe storms and other disasters rising, the electricity people rely on is significantly impacted. For instance, droughts have been associated with a decline in hydropower, which is an important source of U.S. renewable electricity generation. 

Disasters can also lead to significant costs for utility companies. Hawaii Electric faces $5 billion in potential damages claims for the 2023 wildfire, which is nearly eight times its insurance coverage. Lawsuits accuse the company of negligence in maintaining its infrastructure, such as failing to strengthen power poles to withstand high winds. 

Given that the utilities industry is facing the highest risk from extreme weather and climate disasters, some companies have begun to prepare for such events. This means taking steps like burying power lines, increasing insurance coverage, and upgrading infrastructure. 

Given the last days of momentum and growing pressure coming from some NATO countries, this was perhaps inevitable: the United States has now greenlighted Ukraine’s use of American-supplied weapons against Russian territory in a huge escalation which takes the world a big step closer to WW3 and nuclear-armed confrontation.

Politico is reporting Thursday afternoon, “The Biden administration has quietly given Ukraine permission to strike inside Russia — solely near the area of Kharkiv — using U.S.-provided weapons, two U.S. officials and two other people familiar with the move said Thursday, a major reversal that will help Ukraine to better defend its second-largest city.”

An anonymous US official was cited a saying, “The president recently directed his team to ensure that Ukraine is able to use U.S. weapons for counter-fire purposes in Kharkiv so Ukraine can hit back at Russian forces hitting them or preparing to hit them.”

The same official stipulated that the policy of not allowing long-range strikes inside Russia “has not changed.” However, this is surely going to be a distinction without substance or meaning from Russia’s point of view, as it makes attacking Russia’s sovereign territory with US weaponry ‘allowable’ for the first time. According to more details of what are expected to be the immediate implications: 

In effect, Ukraine can now use American-provided weapons, such as rockets and rocket launchers, to shoot down launched Russian missiles heading toward Kharkiv, at troops massing just over the Russian border near the city, or Russian bombers launching bombs toward Ukrainian territory. But the official said Ukraine cannot use those weapons to hit civilian infrastructure or launch long-range missiles, such as the Army Tactical Missile System, to hit military targets deep inside Russia.

It’s a stunning shift the administration initially said would escalate the war by more directly involving the U.S. in the fight. But worsening conditions for Ukraine on the battlefield –– namely Russia’s advances and improved position in Kharkiv –– led the president to change his mind.

Ukraine has been complaining that all restrictions need to be taken off if it is to defend against Russia’s recent major offensive in Kharkiv, which was launched from across the border. For example, Russian artillery is able to fire from rear positions within the Belgorod region near the border. It meanwhile remains part of Moscow’s stated aim to push the border deeper into Ukraine to create a ‘buffer zone’ – making it harder for pro-Kiev forces to shell Russian towns and villages.

Politico’s fresh reporting is consistent with something Secretary of State Antony Blinken said on Wednesday. While visiting Moldova – itself feeling the pressure of the war right next door – Blinken laid out that the US does not “encourage or enable” Ukrainian attacks inside Russia – but he then moved the goalpost by stressing the US would “adapt and adjust” this position based on developing battlefield needs.

A reporter followed up by asking if he meant the White House will now support Ukrainian attacks inside Russia. Blinken responded with: “Adapt and adjust means exactly that.”

On a covert level this was likely already happening all along…

The Biden administration gave a non-Ukrainian foreign intelligence service permission to strike inside Russia using sleeper cells 48 hours prior to the invasion. https://t.co/Kdnn2EgJfJ

— Jack Murphy (@JackMurphyRGR) May 30, 2024

Russian President Vladimir Putin warned earlier this week there will be “major consequences” if NATO countries support long-range strikes on Russian territory. While it’s long been clear that US, UK, French, and other West-supplied weaponry has been used against Crimea, this has yet to be the case when it comes to Russia proper. Or at least any such attack has not been made public yet.

This significant shift underscores the desperation of Western allies as Ukrainian forces have been getting rolled back in the Kharkiv region. It seems Washington, London, Paris, and Brussels simply cannot stomach a Ukrainian loss – but this desperation is leading to deepened and highly dangerous Western deepening involvement in the conflict. 

Meanwhile…

Has anyone noticed that the means by which Trump may or may not have transmitted a payment to a pornstar has been receiving vastly more coverage, commentary, and debate, than the US clearly lurching toward open approval of direct strikes on the world’s largest nuclear superpower pic.twitter.com/aQ6hJk4i46

— Michael Tracey (@mtracey) May 30, 2024

Insane. pic.twitter.com/9ZiT0NzoWo

— David Sacks (@DavidSacks) May 30, 2024

Via Middle East Eye

Saudi Crown Prince Mohammed bin Salman is close to becoming king as the health of his elderly father, King Salman, deteriorates; he was recently treated for a lung infection. While Mohammed bin Salman’s succession to the throne may seem inevitable and straightforward, he will face two challenging decisions: appointing a crown prince and designating a deputy crown prince.

When appointing a future crown prince, he theoretically needs to consult Saudi Arabia’s 1992 basic law of governance, which stipulates that rulers are drawn from the male descendants of Ibn Saud, with the “most upright among them” selected for the role. 

But a 2017 amendment by King Salman notes that after the sons of Ibn Saud, there should be “no king and crown prince belonging to the same branch of the founder king’s descendants.”

In practice, as king, Mohammed bin Salman would have enough power to ignore the amendment and appoint one of his brothers as crown prince – but this would not be without consequences. He would appear even more ruthless in excluding other branches of the House of Saud. 

Such a move would further alienate the large pool of cousins belonging to important branches, such as al-Fahd and al-Sultan, neither of which has been humiliated like al-Nayef and al-Abdullah. So far, despite rumors about who Mohammed bin Salman may select as crown prince, the decision has been kept secret.  

It is also uncertain as to whether the future monarch would follow the path of King Abdullah, who created the role of deputy crown prince in 2014 (before dying the following year), fearing a power vacuum if he and his crown prince both died within a short period of time. But the post of deputy crown prince has been vacant since 2017, the year Mohammed bin Salman ascended to the role of crown prince.

Establishing power

King Salman never appointed a deputy crown prince, for two reasons. First, the young age of Crown Prince Mohammed bin Salman, who was in his early thirties in 2017, made it unlikely that he would die any time soon and require a deputy to step in.

Second, and more importantly, King Salman would have struggled to find a suitable deputy crown prince, as he and his son antagonized several branches of al-Saud lineage, namely Nayef and Abdullah.

Former Crown Prince Mohammed bin Nayef received the most humiliating blow when he was sidelined after decades of holding highly sensitive and important positions in the interior ministry and intelligence services. He was put under house arrest and has since disappeared from public life.

King Abdullah’s son Mutaib, the former chief of the Saudi Arabian National Guard, was equally humiliated when he was sacked from his military role; he has also disappeared from public life following allegations of corruption.

King Salman and his son have not endeared themselves to these two branches of the royal family and their descendants. The king could still have chosen a deputy crown prince from the other remaining important branches, but he didn’t.

Perhaps King Salman wanted his own son to have time to establish his power base without the patronage of older senior princes, most of whom had held senior positions in government as ministers or military commanders. 

Royal prerogatives

Over the last seven years, Mohammed bin Salman has been a solo crown prince. He effectively became the state, amassing tremendous power over every aspect of government and life in Saudi Arabia, from the military to entertainment.

Mohammed bin Salman has been an absolute ruler, listening only to his close friends, foreign advisers, consultants and coterie. His domestic and foreign policies reflect his own desires, rather than consultation with a large group of senior and more experienced princes. A deputy crown prince would have been a nuisance, to say the least.

In addition, the majority of eligible candidates for the positions of crown and deputy crown prince are still haunted by the memory of the Riyadh Ritz Carlton, which doubled as a detention center after Mohammed bin Salman launched a wide-ranging “anti-corruption” crackdown against powerful officials in 2017. He later released them after they paid billions of dollars to the state.

As future king, Mohammed bin Salman will face the challenge of appointing an eligible crown prince and a deputy, both of whom must not challenge him or appear stronger than he is due to experience, age or aura. He will have to choose less powerful and more docile princes, so that they do not undermine his authority and single-mindedness.

No doubt, Saudi society will be irrelevant to the process, as these decisions are strictly royal prerogatives. The future of the leadership is beyond a disenfranchised society that lacks pressure groups or civil organizations. Religious scholars, merchants and tribal groups will have no say in the matter; they will simply be summoned to the palace to pledge allegiance to whomever Mohammed bin Salman chooses.

This is how a repressive absolute monarchy works. It does not consult – let alone share power – with its own royals, not to mention elites and notables.    

The stablecoin sector is gaining momentum after a new Bloomberg report revealed that Russian commodities firms have adopted fiat-pegged digital currencies to execute cross-border transactions with Chinese counterparts. 

Russian commodities firms, trading anything from base metals to timber, have started using Tether Holdings Ltd.’s stablecoin to settle cross-border transactions with Chinese customers and suppliers. These settlements are being routed through Hong Kong. 

The appeal of stablecoins comes as the US Treasury Department has unleashed endless rounds of sanctions on Chinese and Russian companies for various reasons, ranging from a trade war between Washington and Beijing to a hot war in Eastern Europe. 

The increased utilization of stablecoins comes more than two years after Russia invaded Ukraine and highlights how Moscow has adapted to a changing economic environment where seven Russian banks were banned from the SWIFT messaging system. 

The lasting effect of Western sanctions on Russia’s economy only makes stablecoins more useful, including for cross-border transactions. It also helps mitigate the risk of frozen overseas bank accounts—something the Russians found out after they invaded Ukraine. Even unsanctioned Russian companies have found stablecoins a safer alternative to the traditional Western banking system. 

“With stablecoins, the transfer may take just 5-15 seconds and cost a few cents, making such transactions pretty efficient when the sender already has an asset base in stablecoins,” said Ivan Kozlov, co-founder of Resolve Labs. 

Kozlov continued, “In countries that are facing dollar liquidity issues and capital controls, cross-border settlements through cryptocurrencies and, specifically, dollar-linked stablecoins, are a relatively common practice, and not only in commodities.” 

The growing adoption of stablecoins in Russia’s global trade reveals that Western sanctions have failed to implode the Russian economy. There’s even been news of the Russian Central Bank experimenting with crypto payments for international transactions. 

About a year ago, Rosbank, one of Russia’s major banks, launched a facility that enabled importers to settle transactions using crypto. Since then, additional banks have started offering similar services. 

The stablecoin trend doesn’t end with Russia. Venezuela’s state-run oil company, PDVSA, has slowly moved oil sales to USDT after the US recently imposed sanctions on the country. 

Even as these developments show cryptocurrencies have use cases, President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, stated in April, “[Bitcoin has] no actual utility in the economy, other than being a nice toy that some people enjoy owning and trading.” 

Authored by Andrew Korybko via Substack,

Russia is poised to strategically partner with the Taliban upon the impending removal of its domestic terrorist designation, which will in turn revolutionize bilateral relations with Afghanistan. Readers can learn more about each complementary aspect of this policy here and here. The present piece presupposes at least passing knowledge of what Russia aims to achieve and why, particularly the interconnected security and economic drivers behind these latest developments.

In brief, Russia envisages building up the Taliban’s capabilities so that they then more adequately contain and hopefully defeat those ISIS-K terrorists that have established themselves in Afghanistan. Once the security situation is stabilized, transnational connective infrastructure projects from Russia to South Asia via Afghanistan can then finally begin to take shape. These include a gas pipeline, an overland oil export route facilitated by a planned Afghan hub, and a railway, the latter two of which can go hand-in-hand.

These ambitious goals are expected to accelerate multipolarity processes upon their completion through the fulfillment of Russia’s related Ummah Pivot and Greater Eurasian Partnership concepts, the last two pieces of which are Afghanistan and neighboring Pakistan. Comprehensively expanding strategic ties with Afghanistan will in turn enable the symmetrical expansion of those with Pakistan if Islamabad has the political will, which remains to be seen though considering the expansion of US influence there.

The way in which Russian-Pakistani relations evolve might also inadvertently stoke suspicions in India if they move too fast, some of whose experts and policymakers fear that Russia is increasingly beginning to fall under Chinese influence, which readers can learn more about here and here. The tangible consequences of exacerbating this perception could abruptly disrupt multipolarity processes if they empower India’s pro-US faction in the event that newly troubled ties with the US improve.

The most effective way to preemptively counteract this scenario is for Russia to pioneer an Afghan development quartet between those two, India, Iran, and Uzbekistan aimed at fully incorporating that war-torn country into the North-South Transport Corridor (NSTC). This would build upon November 2022’s Russian-Indian-Iranian Troika on Afghanistan in the new conditions of Moscow recognizing the Taliban as that country’s official leaders and Russia turning Uzbekistan into a regional logistics hub.

President Putin’s recent offer to help Uzbekistan reach more markets for growing its economy could take the form of incorporating it into this proposed quartet for optimizing all parties’ multilateral cooperation along the NSTC. While it appears inevitable that Afghanistan will one day facilitate Russian-Pakistani trade, even if it still takes some time for Islamabad to patch up its problems with Kabul and clinch associated pacts with Moscow, this could reassure India that its influence won’t be lost in that event.

India worries that a Russian-brokered improvement in Taliban-Pakistani ties incentivized by the earlier mentioned connectivity projects could lead to a surge of regional Chinese influence upon the northern expansion of the China-Pakistan Economic Corridor (CPEC) into Central Asia via Afghanistan. The only way to calm these concerns is for India to beat China to the chase by having the NSTC become the bedrock of Afghanistan’s reconstruction and future economic development before CPEC does.

Considering the way in which Afghan society is organized, those trade opportunities that are opened up by the NSTC could lead to the informal creation of local patronage networks that would help India maintain its influence there amidst the possible surge of CPEC-driven Sino-Pak influence in the future. Getting ahead of the curve by cultivating loyal elites through sustainable economic means would go a long way towards assuaging India’s fears that the latest Russian-led processes are to China’s advantage.

The enormous rupee stockpile that Russia accumulated in India over the past two years largely as a result of their unprecedented energy cooperation brought about by generous oil discounts, which spiked bilateral trade to a record $65 billion last year, could also be relied upon in pursuit of this end. These rupees could be invested in coordination with India into pioneering an Uzbek-Afghan-Iranian trade corridor that could incorporate the planned oil hub in Herat for further ramping up Russian-Indian trade.

Streamlining this branch of the NSTC could unlock innumerably profitable opportunities for all stakeholders, especially Russia and India, not to mention accelerating the pace at which the suggested Afghan patronage networks could be created for preemptively counteracting Sino-Pak influence there. Through these means, India would be less likely to perceive the improvement of Russian-Afghan and eventually -Pakistani ties as benefiting their Chinese rival, thus discrediting that country’s pro-US faction.