🌍 China’s balloon bursts US inviolability


🌍 China’s balloon bursts US inviolability

Plus: Tax for thee, but not for me

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Today’s edition is a 5 min read:

  • 🇨🇳 China’s spy balloon casts US-China relations adrift.
  • 📁 Will the global corporate minimum tax hold up?
  • ➕ Plus: North America’s unexpected new oil giant, how the papers are covering balloon-gate, and a jilted man in Singapore seeks to mend his broken heart the good ol’ fashioned way (in court).

– VC & EP

🎧 The first episodes of Intrigue Outloud drop next week on Apple, Spotify, or wherever you get your podcasts!

🗺️ AROUND THE WORLD
  1. 🇯🇵 Japan: Japan and China have agreed to maintain communication at “all levels” to mend ties. Their 1978 pact pledged to work towards “perpetual peace and friendship”, but tensions persist around disputed islands, military build-ups and trade.
  2. 🇯🇲 Jamaica: Jamaican Prime Minister Andrew Holness has announced his government is ready to send soldiers and police officers to Haiti as part of an international peacekeeping mission. Haiti is currently engulfed by gang violence.
  3. 🇸🇩 Sudan: Israel and Sudan will finally normalise relations. A legacy of Trump’s ‘Abraham Accords’, officials hashed out the deal in Khartoum, where the Arab League once issued its infamous ‘Three No’s’ on Israel: no recognition, no peace, and no negotiations.
  4. 🇮🇳 India: The losses incurred by the Adani Group have topped $100B following fraud allegations by a US research firm. India’s opposition is demanding an investigation into the alleged fraud at the Group, which enjoys close ties to Prime Minister Modi.
  5. 🇪🇸 Spain: Spain and Morocco are back on more friendly terms after signing over 20 economic agreements. The countries have long-running disputes over two tiny Spanish enclaves on Morocco’s Mediterranean coast (the EU’s only land borders with Africa).
🇨🇳 US-CHINA RELATIONS

Who knew The Wiggles were such hawks? Via: Tenor.

Hot air from both sides as China’s spy balloon spoils the party

Briefly: Days before US Secretary of State Blinken was due to visit Beijing, a Chinese high-altitude surveillance balloon appeared over sensitive military sites in the US. So Blinken cancelled his visit and President Biden ordered a US Air Force F-22 Raptor to destroy the helium-filled interloper over the Atlantic, where falling debris was less risky.

To quote former Obama aide Ben Rhodes: “At least we have a plot for Top Gun 3″.

Predictably, Beijing wasn’t happy:

  1. China initially showed contrition over what it said was a ‘climate-research balloon’ blown off course by “Westerlies” (any opportunity to blame something coming from the West!).
  2. But after the US popped its balloon, China quickly pivoted to outrage, accusing the US of a “clear overreaction” and reserving the right to “deal with similar situations”.

Thankfully Chinese netizens found the funny side, wishing everyone a happy Lantern Festival but replacing the traditional moon image with… well, you can probably guess.

Intrigue’s take: China’s reference to dealing with “similar situations” in the future was notable. Some analysts see this as a thinly veiled threat to shoot down US intelligence aircraft over the South China Sea, much of which China (unlawfully) claims as its own.

We were also struck by the breathless political reaction in the US. This wasn’t due to any real military or intelligence risk. Rather, it was about the puncturing (by a balloon) of US territorial integrity for the first time since the 2001 terrorist attacks.

For many Americans, watching a spy balloon float right over their homes was a tangible sign of the dire state of US-China relations. Though we shouldn’t be surprised by Biden’s decision to shoot it down: “just another example of Biden fighting inflation” (pun of the day right there).

Also worth noting: 

  • A Beijing think tank has claimed the US last year sent 589 intelligence-gathering flights over the South China Sea.
  • In 2001, a US spy plane made an unauthorised emergency landing on China’s Hainan Island after colliding with a Chinese fighter jet, leading to a tense ten day standoff.
📰 GLOBAL PERSPECTIVES

How different newspapers covered: The discovery of a Chinese spy balloon over the US.

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📁 GLOBAL | BUSINESS

The US led negotiations on the global minimum tax, but has yet to ratify it.

Multinationals beware: countries ready global minimum tax

Briefly: On Thursday (2 February), the OECD (a Paris-based club of rich countries) circulated its final guidance for a global corporate minimum tax rate of 15%, potentially upending over a century of taxation practice around the world.

Backtrack: The OECD has been pushing for a global corporate minimum tax for over a decade. The aim is to stop tax havens ‘low tax jurisdictions’ from competing via ever-lower tax rates to lure multinationals. After years of negotiation, nearly 140 countries agreed to the plan in 2021.

Intrigue’s take: The Biden Administration has been one of the scheme’s most ardent supporters and even dispatched Treasury Secretary Yellen to lead the global negotiations. The deal was key to Biden’s plan to raise corporate taxes at home, reducing the incentive for US companies to head abroad. But in a classic case of ‘do as we say, not as we do’ diplomacy, the US omitted key parts of the OECD deal when implementing its 15% rate last year.

Also worth noting: 

  • An OECD report from 18 January estimated that a 15% global minimum tax would yield an additional $220B in annual tax revenues around the world.
  • One of the world’s leading ‘low tax jurisdictions’, Switzerland, is set to hold a referendum on the OECD plan in June, though the country’s finance minister has conceded the Swiss will end up participating one way or another.
📊 CHART OF THE DAY

Credits: Financial Times.

This one is a doozy…

… and it’s all because of a massive oil boom in New Mexico’s Permian Basin, otherwise known as the ‘Michael Jordan of oil deposits’ (okay, we’re the only people calling it that).

But the original Mexico is part of the story, too. Crude output from Mexico’s state oil firm Pemex has halved from its peak in 2004 due to mismanagement and underinvestment. Plus, Mexico’s politics have complicated efforts to partner with private companies that could help the country reach its petroleum potential.

And it’s not just Mexico. Latin America as a whole ‘underproduces’ oil by as much as $1B per day. Good news for the environment, perhaps, but bad news for Latin American budgets.

👀 EXTRA INTRIGUE

A collection of odd and light-hearted news to start your week with a chuckle (or a groan).

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