North-South relations dominate ahead of opening ceremony
The 23rd Winter Olympics kicks off in PyeongChang today, with millions of global viewers set to witness the entrance of a combined Korean team marching under a unity flag.
Presaged by Kim Jong-un’s New Year’s Day speech, North-South relations have experienced a significant thawing over the past month. Urgent meetings held in January to discuss the fielding of a joint Olympic team were the first face-to-face intergovernmental discussions held in two years.
Yesterday’s arrival of US Vice President Mike Pence is Washington’s rebuttal to the presence of North Korea’s symbolic head of state Kim Yong-nam, the most senior official ever to visit the South, and Jong-un’s sister, Kim Yo-jong. The US hopes Pence will undermine any “hijacking” of the Games’ message that the North might promote.
While Russia and China have promoted the talks that led to a unified team as a move in the right direction, Washington remains sceptical; Pyongyang has long pursued a strategy of rapprochement to achieve concessions followed by renewed antagonism. Expect the depth of renewed North-South bilateral relations to be tested when US-South Korean military exercises kick off in April.
RUSSIAN MONETARY POLICY
Low inflation and positive outlook drives further rate cuts
Following a 0.5% rate cut in December, punters are expecting the central bank of Russia to slash rates by a further 25 basis points today.
Two years after it raised rates to 8.6%, the Bank is pursuing a policy of easing amid some of the lowest inflation rates in the post-Soviet era. Pushing down inflation is a bullish rouble, up 3.6% since the bank’s December meeting. In an import-dominant economy, the stronger rouble has lowered the cost of imports and kept inflation below the bank’s target of 4%.
With fiscal revenue highly dependent on oil production, the value of the rouble closely follows the global price of oil. A recent OPEC-plus deal to extend production cuts until the end of 2018 has seen the bank revise its modelling, with the price per barrel expected to top $55, up from $44.
After a sluggish economy in 2017 that generated only 1.5% growth—half a percentage below the economy ministry’s target—the central bank hopes today’s cut will boost consumer spending and encourage greater borrowing from local businesses.
Carnival gets underway in Brazil amid yellow fever outbreak
Brazil will kick off its annual week-long Carnival celebrations today, with Rio de Janeiro expecting to welcome millions of tourists.
But foreign party-goers may be put off by a recent outbreak of yellow fever. Brazilian health authorities have confirmed more than 350 cases since last July, with at least 98 fatalities. Unusually, the outbreak has occurred in urban centres and areas previously untouched by the disease; Sao Paulo, the most populous city in the southern hemisphere, has experienced more than half of all confirmed cases.
Given last year’s similar outbreak, the worst in 50 years with 509 cases and 159 deaths, authorities launched a campaign to vaccinate Brazil’s population of 200 million against the mosquito-borne disease.
Already unlikely due to sheer logistics, Brazil’s plan to counter the outbreak may not even be enough. Bolivia, Colombia, Ecuador, Peru and Suriname have also reported cases of yellow fever in the past two years. As such, failure to contain the outbreak could see Latin America facing an epidemic.
OIL AND GAS
Lebanon to sign exploratory deals for disputed offshore gas fields
Israeli-Lebanese tensions have surfaced again over the status of disputed oil fields in the eastern Mediterranean. Coming amidst a push by both countries to increase their energy security, the dispute has the potential to exacerbate already strained relations.
The Lebanese move towards beginning production in its exclusive economic zone comes almost a year after Lebanon concluded auctions for private companies to explore in five offshore blocks, including industry heavyweights Total of France and Eni of Italy. In question are the Leviathan and Tamar fields, with Lebanese production scheduled to begin this year despite multiple blocks skirting Israel’s maritime territory. Israel’s ultra-nationalist Defence Minister Avigdor Lieberman considers any claim to the fields by Lebanon or by private companies a major violation of Israeli sovereignty. Israel has aspirations to become a major natural gas supporter, with development of the two fields seen as a way to develop energy diplomacy with neighbouring countries such as Egypt and Jordan.
In the absence of any international ruling regarding sovereignty over the contested oil blocks, the standoff is likely to continue. Despite the private European consortiums’ commitment to begin exploration in the Lebanese blocks, expect volatile tensions between the two countries in the short-term.