World Events Summary: 4th-10th August 2018

Turkey: the spat with the U.S. worsened – with symbolic Turkish retaliation against two American officials met with an increased tariff on Turkish Steel (50%) and Aluminum (20%) exports to the U.S. The lira went into freefall and was not helped by the finance minister’s (Erdogan’s son-in-law) attempts to present a market-friendly picture. The ECB increased its concern about EU banks with significant Turkish exposure.

China: multiple reports in international newspapers suggested that a split in the ruling party had widened over the trade war with the U.S. The two sides seem to be debating how China is presented to the world and whether Trump’s attacks were incited by Xi’s rhetoric. The official People’s Daily issued an unusually public rebuttal stating that ‘elephants can’t hide’ and that China had become too large to hide its strength.

US-Russia: more sanctions (hitting Russian imports of dual-use technologies that could be used for military purposes) were inevitable after Trump’s performance in Helsinki. Leaks suggest that Putin, in part, lobbied Trump regarding a more-traditional arms control agenda than much of the speculation had suggested. Russia and China objected to U.S. attempts to place a Russian bank on a UN Security Council blacklist.

Caspian Sea: an agreement, 20 years in the making, is expected to be signed on Sunday. This sets out the rights and responsibilities of the successor states to the USSR in the sea and potentially frees up the region for greater hydrocarbon exploitation. This is widely perceived as a way for Russia to shore-up its backyard in an era of greater geopolitical competition for influence, with confirmation of its military role in the sea.