🌍 Japan and US team up to boost critical mineral supply

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🗺️ AROUND THE WORLD

1. 🇰🇵 North Korea: Pyongyang is resuming diplomatic activities following three years of pandemic-related isolation. Its diplomats have revived their engagement with Russia and China, potentially paving the way to restart stalled talks over North Korea’s nuclear programme.

2. 🇧🇪 Belgium: Chinese telco giant Huawei has become the target of increased scrutiny by Belgian intelligence. Belgian authorities are particularly interested in Huawei’s EU lobbying efforts after another lobbying scandal (‘Qatargate’) recently rocked Brussels.

3. 🇳🇿 New Zealand: Kiwi defence minister Andrew Little has said New Zealand is considering joining the non-nuclear arm of AUKUS, a trilateral security and tech pact between the UK, US and Australia. In 1984, New Zealand passed legislation making the entire country a nuclear-free zone.

4. 🇲🇽 Mexico: At least 39 people died when a fire broke out in a migrant detention facility on the Mexican side of the US border. Mexico’s president (‘AMLO’) has repeatedly cut funding to the country’s migration agency.

5. 🇸🇾 Syria: The US carried out airstrikes against Iran-linked targets in Syria in retaliation for a drone attack which killed a US contractor. Iran and Syria condemned the US strikes, which reportedly killed 19 people.

🇯🇵 JAPAN | TRADE

Japan joins the US green subsidy bonanza

Briefly: Japan and the US have reached a deal to boost cooperation on key minerals used in electric cars in a bid to reduce dependence on China. The agreement will allow electric vehicles (EVs) with metals collected or processed in Japan to benefit from massive US green subsidies.

A win-win: The incentives for Japan are clear: free subsidies courtesy of Uncle Sam. But what does the US get out of this?

1. 🤝 Resolving a trade dispute with an ally

Washington’s massive green subsidies package last year gave a competitive advantage to the US and its free trade partners. But a frustrated Japan (lacking a US free trade deal) was left out. The EU was likewise peeved.

So this latest pact brings Japan into America’s green subsidy tent, and removes a real irritant with a close ally. The US and the EU are working on a similar deal.

2. 💪 Diluting China’s green tech dominance

China’s dominance of critical mineral supply chains, plus battery and solar production, means it’s also well placed to dominate downstream sectors like EVs. And it’s hard for any other single country to compete with China on scale.

So the US and its partners are pooling their strengths in the hope their green industries can thrive together, rather than wither alone.

Intrigue’s take: One other thing comes to mind here: the US knows it needs to ink more meaningful trade deals to compete with China’s influence. But after decades of economic disruption, US voters don’t really like trade deals right now.

So Biden may have found a loophole: mini-deals (like the Japan-US one above) help the US compete with China, without the need for congressional approval. Of course, his decision to bypass Congress still drew a sharp rebuke (from Congress).

Also worth noting:

• Japan said it would need an investment of around $24B to develop a competitive battery manufacturing sector.

• Last year, Japan signed a critical minerals supply agreement with Australia, to ensure Australia continues to supply Japan with rare earths, lithium and other key materials for the energy transition.

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🇨🇳 CHINA | GEO-ECONOMICS

China’s infrastructure projects are costlier than they seem

Briefly: China issued $240B in bailouts to debt-saddled developing countries between 2000 and 2021, according to a recent study. And more than half of that was just in the final four years of the study. So China’s rescue loans are big, and getting bigger (fast).

China has used its Belt and Road Initiative (BRI) to fund infrastructure projects around the world. These projects often carry more risk than Western lenders are willing to tolerate. When the borrowers end up in distress, China generally charges 5% interest on its rescue loans (compared to 2% at the IMF).

The end result? After ten years and a trillion dollars (or more!) in total expenditure, China’s BRI has delivered plenty of infrastructure projects around the world. Some of them have been subpar. And many host countries are now finding themselves under mountains of unpayable debt.

Intrigue’s take: The world has tried to boost international development a million different ways over the years. And China’s own record at home is pretty remarkable: lifting 800 million people out of poverty in four decades.

But just like an Australian trying to buy ‘thongs’ in the US, we’re seeing that what makes sense at home can get you into trouble abroad. In this case, China’s tried and tested strategy at home (fire-hosing cash to build infrastructure) is proving trickier abroad.

Also worth noting:

• According to the same study, 5% of China’s overseas loan recipients were debt distressed in 2010; by 2022, that figure had grown to 60%.

• Last week, Sri Lanka’s President Ranil Wickremesinghe asked China and other lenders to cooperate to help his country restructure its debt.

👀 EXTRA INTRIGUE

Some big numbers out of the world of electric vehicles (EVs):

• 17% – the percentage of total global greenhouse gas emissions originating from road transport.

• 20 million – the total number of EVs on the road, globally.

• 0.5% – the percentage of global electricity consumption used by EVs.

• 250 billion – total US$ spent on EV purchases worldwide in 2021.

📸 PHOTO OF THE DAY

They say the camera can add ten pounds…

… in this case, it added 5 inches (in height). FIFA’s South American governing body honoured World Cup champion and football superstar Lionel Messi on Monday night with an over-enthusiastic statue. At least it’s better than Cristiano Ronaldo’s.

Yesterday’s poll: Do you think Israeli PM Netanyahu will manage to pass his judicial overhaul?

🟨🟨🟨⬜️⬜️⬜️ 👍 Yes, he’ll find a way (he always does) (33%)

🟩🟩🟩🟩🟩🟩 🙅 No, he’s now facing way too much opposition (63%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🖋️ Other (write in!) (4%)

Your two cents:

• 🙅 L.N.K: “Israel has long been considered “the most stable country in the middle east” by many western allies. Netanyahu is seriously risking this distinction with the current reform”.

• 👍 J.M: “But…the concessions he will need to make along the way will likely come back to bite him.”