Reaction of the day

“The President gets his interest-rate cut—and all that comes with it.”

That’s how The Wall Street Journal’s editorial board has responded to Fed Chair Powell’s widely-anticipated 25 basis point cut on Wednesday. I.e., after months of calling for cuts, the president might now get credit if everything works out fine (inflation cools, the economy soars). Or he gets blamed if voters feel sustained inflation eroding their wages.

A race in the Indo-Pacific

Australia’s Anthony Albanese flew into Port Moresby this week expecting a big diplomatic win with his Papua New Guinea (PNG) neighbours: a long-anticipated Pukpuk mutual defence treaty promising joint security, shared training, cross-enlistment between militaries, plus a US$400M sweetener for things like sprucing up PNG’s parliament. 

In short, it’d upgrade Australia-PNG ties to a full-blown alliance (PNG’s first).

Instead, Albo (as he’s widely known) returned home with something much more mid: a statement promising the two neighbours will sign that treaty just as soon as they can. 

Maybe no big deal, right? They’ll cross those t’s and dot those lower-case-j’s, then sign.

Except… it’s the second delay of its kind in as many weeks, after Australia’s other US$330M pact with Vanuatu got put on ice.

So what’s going on here?

In military terms, an Australia-PNG alliance would be a bit like us becoming tennis doubles partners with Roger Federer — half the duo is a fair bit stronger.

So what’s in it for Australia?

Canberra talks about how rapidly Australia’s ✌️strategic outlook✌️ is ✌️deteriorating✌️, which is diplo-speak for crikey have you seen China’s military build-up. Beijing also rattled some in the region via its secretive security pact with Solomon Islands in 2022, and then again when it suddenly conducted live fire drills off Australia’s coast earlier this year.

But it’s not just hard power. China has also beefed up its regional influence via more infrastructure, trade, loans, and grants, all with fewer strings around, say, human rights.

So the Australians, caught out in 2022, have been hustling to counter China ever since, signing big pacts with Nauru and Tuvalu (and hoping Vanuatu and PNG might join) to avoid a Solomons repeat. They’ve used a mix of tactics, too, with levers across security, migration, and even sport.

So then… why the delays with Vanuatu and PNG?

Vanuatu has voiced concerns a big pact with Australia could jeopardise ties with China. And PNG is arguing it’s just a procedural thing, but there’s word it’s now quietly sending its defence minister to Beijing for a quick check-in before signing. Both Pacific nations have also flagged the importance of respecting their own sovereignty (PNG is celebrating its 50th anniversary of independence from Australia this week).

But the fear in Canberra is Beijing must have pressured these islands not to sign. Another consideration is the fact that, while Pacific Islands have voiced unease at being treated like pawns, they’re also now very adept at milking any competition for their own interests: Vanuatu’s deal, for example, is a massive upgrade on one it declined to ratify back in 2022.

Anyway, the likelihood this was all just a procedural hiccup will shrink with each passing week ahead.

Intrigue’s Take

Drawing parallels from history, let alone literature, can be fraught, but indulge us this one chance to reflect on the polarising Rudyard Kipling novel Kim from 1901. It’s set amid the ‘Great Game’, when the Brits and Russians were competing for influence in colonial India.

Here are four quotes that come to mind:

• “The Game is so large that one sees but a little at a time.” — this kind of geopolitical competition is opaque, long-term, and fluid, with each victory potentially only ever a mere morsel sitting within bigger jaws of defeat.

• “There is no sin so great as ignorance. Remember this” — Australia learned the hard way that decades of partnership (even if flawed) might not be enough to stop a determined rival from out-drawing you when the opportunity arises. You fill the gaps not just with intel, but investment.

• “I am Kim. I am Kim. And what is Kim?” — there’s an identity crisis at play for all involved, whether it’s Pacific Islands balancing their traditional Western ties against new opportunities out of China, or the West balancing its democratic values against the need for hard-nosed deals to counter authoritarian influence.

• “When everyone is dead the Great Game is finished. Not before.” — it’s a reminder how endless and all-consuming this kind of rivalry can become once it gets entrenched in every capital’s calculations. Like Kim’s Great Game in India, this escalating game in the Pacific will only end when one side gets exhausted. Not before.

Sound even smarter:

• Australia and its Pacific neighbours are hoping to co-host next year’s COP climate talks — it’s an issue the Pacific Islands frequently cite as their top concern.

Meanwhile, elsewhere…

Extra Intrigue

Intrigue’s commodities corner:

• Gold: Deutsche Bank now assesses gold could hit $4k/ounce next year amid central bank demand, worries surrounding Fed independence, and a weaker USD.

• Oil: US crude inventories dropped unexpectedly last week as net crude oil imports hit a record low (exports are soaring).

• Bio-fuels: The Australian government has pledged to invest $735M in next-generation bio-fuels as part of its net zero commitments.

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Mascot of the day

Legislators and bureaucrats are always thinking of creative ways to enfranchise citizens: ad campaigns, free tours, meet and greets, school group visits – you name it. But Peru has now adopted a strategy as old as time: the cute mascot. 

Congresito (little congress), the building-shaped mascot, is now making its debut across social media. But given the widespread dissatisfaction towards the Peruvian political class after a tumultuous few years, it didn’t take long for local netizens to coin a few other colourful names, like ‘Corrupcito’ (little corrupt one). 

Today’s poll

Yesterday’s poll: Who do you think is winning the AI race today?

🇺🇸 The US, with its monopoly on advanced chips (31%)
🇨🇳 China, with its talent pool and real-life applications (65%)
✍️ Other (write in!) (4%)

Your two cents:

• 🇨🇳 R.C.O: “The vast majority of AI doesn't need the latest GPU to be effective. And, algorithms always improve, likely accelerating this trend.”

• 🇺🇸 M.T.M: “Brain power is great, but you need the computing power to support it. China's paucity of high-end CPUs will hobble even the best minds.”

• ✍️ X.F: “It’s far too early to call.”