Tom Arms’ World Review

NATO

The current Arctic military exercises are relatively small by NATO standards. But they are hugely significant. They are they the first manoeuvres in which Finland has participated as a full member of the Alliance.

In fact, 12 countries are participating; two of whom are NATO partners: Sweden and Switzerland. The latter has been neutral for more than half a millennium.

There is no chance that the Swiss will end their neutrality, but in the wake of Russia’s invasion of Ukraine Sweden decided that the NATO umbrella was more important than its 200-year non-alignment policy. Unfortunately, NATO membership requires the support of all 31 member countries. Two members, Turkey led by President Tayyip Recep Erdogan and Hungary led by self-declared illiberal Prime Minister Viktor Orban, blocked it.

The hope of the rest of the Alliance is that Erdogan will be more receptive to compromise following his 28 May re-election for a further five years. In the next few weeks there will be a constant stream of visitors to Ankara to try to persuade the Turkish leader to drop his veto. They will be led by NATO Secretary General Jens Stoltenberg but will also include senior officials from the US, UK, France, Germany, the Baltic states and, of course, Sweden.

The aim is to change Erdogan’s mind so that the Alliance welcome the Swedes into NATO alliance at the heads of government summit in Vilnius, Lithuania on 11-12 July. But NATO has to overcome Hungarian objections as well as Turkish.

Hungary’s veto is based on two important foreign policy pillars: good relations with Russia and Turkey. The former is rooted in land-locked Hungary’s total dependence on Russian oil and gas. This is also the reason Hungary continues to defy Western sanctions by buying Russian energy. The Turkish connection is based more on a common ideology between the two right-wing populists – Erdogan and Orban.

The official stated reason for Hungarian opposition is Swedish criticism of Orban’s democratic credentials. “Stockholm,” wrote a Hungarian government spokesperson recently, “sits on a crumbling throne of moral superiority.” It is a weak argument. Swedish criticism of Orban is no greater than that of most of Western Europe, and the hope is that if Erdogan has been brought into line, Orban will follow.

USA

America will NOT default on its debt. That is a near – but not quite – certainty. The House of Representatives has voted to raise the debt ceiling. The Senate has to follow suit by 5 June and is almost certain to do so.

In the end there was the inevitable compromise between the Republican-controlled House and Democratic President Joe Biden. To please the Republicans $1.3 trillion was shaved off the federal budget.

There were some cuts to welfare spending but not enough to alienate Democratic Congressmen but enough for Republicans to point to an achievement. The biggest White House concession was to allow the building of an oil pipeline through West Virginia in order to secure the support of troublesome Democratic Senator Joe Manchin as well as Republican congressmen.

In the context of the bigger picture the amount saved is insignificant. The Congressional Budget Office estimates that the federal government will spend $80-plus trillion over the next ten years.

The problem that both parties face is that there is virtually no room for discretionary spending cuts. To start with there is defense. Both parties support a large defense establishment. The result is that US defense spending is 3.1 percent of GDP and 12 percent of the federal budget.  American government spending on its military represents 40 percent of military spending in the entire world.

But an untouchable military is only part of the budget problem. Two-thirds of federal spending is the even bigger sacred cow of social security (state pensions) and medicare (medical insurance for the elderly). Both of these are increasing in line with an ageing American population.

Republicans are especially vulnerable to charges that they want to cut hand-outs to the elderly, the majority of whom are Republican voters. The Democrats on the other hand, are vulnerable to charges that they plan to increase taxes to pay for the cost of the ageing population.

The polarised brinkmanship over recent months has proven that inherent problems of reducing federal spending do not prohibit bitter political battles. There is little doubt, that the world will hold its financial breath again when the issue of raising the debt ceiling is discussed in two years’ time.

There is, however, an outside chance that the damaging battle can be avoided. The White House is considering using the two-year interregnum to seek a court judgement declaring the debt ceiling unconstitutional

Shipping

The Suez Canal was blocked again this week. This time it was only for a few hours when the Hong Kong registered container ship the Xia Hai Tong ran aground. But the incident again highlighted the importance of shipping to world trade, the canal and the world’s vulnerability to maritime chokepoints.

Starting with shipping in general. A staggering 80 percent of the world’s goods are transported on ships. About one percent go by air and the rest on rail and road. Twelve percent of the world’s shipping transits through the Suez Canal and six percent goes through the Panama Canal.

But those are only two of the maritime chokepoints. The Dardanelles has hit the headlines this year because it links the Black Sea to the rest of the world. And bordering the Black Sea are the fertile wheat fields of Ukraine and Russia which feed large swathes of the Middle East, Europe and Africa.

The disputed South China Sea is the main corridor for ships going to and from China, Taiwan, Vietnam, the Philippines, Japan and South Korea. An estimated 21 percent of the world’s trade passes through the South China Sea. It is worth more than $3.5 trillion a year.

Britain has a major stake in three maritime chokepoints—the English Channel, Gibraltar and the Greenland-Iceland-UK Gap. The English Channel is the world’s busiest seaway with 500 ships a day passing through it. 120,000 ships a year sail past Gibraltar carrying a third of the world’s trade and the Greenland-Iceland-UK Gap guards the Baltic approaches to the North Atlantic.

Then there is the Strait of Hormuz with Persian Iran on the north bank and Arab Oman guarding the southern side. Through this narrow waterway travels 20 percent of the world’s energy from the Persian Gulf oil and gas fields to the rest of the world.

Brazil and Venezuela

Brazilian President Lula has welcomed Venezuela’s Maduro back into the Latin American fold. The occasion was a summit in Brasilia of South American leaders.

The meeting between the two could have been limited to a handshake on the conference steps. But no, Lula went for a heavily publicised fringe meeting and a full embrace for the cameras. The Brazilian leader declared that the event marked “the beginning of Maduro’s return.” He also criticised US sanctions against the Venezuelan dictator.

Part of the reason for this change in Brazilian foreign policy (Maduro was banned by Lula’s predecessor Jair Bolsonaro) is that both Lula and Maduro are on the left of Latin American policies. Another is that Venezuela and Brazil share a 1,400-mile long border and most of it is Amazonian rain forest which Lula is keen to protect from illegal Venezuelan gold mining.

Another reason is Lula’s desire to be a world class peacemaker. He has already inserted himself in the Ukraine War by proposing a “peace club” to end the conflict. His public embrace of Maduro is being interpreted by many as an attempt to further burnish his international credentials by guiding Venezuela back to democracy. It will be a difficult—perhaps impossible—task given that Maduro has repeatedly trashed the constitution and the electoral process, ignored human rights and destroyed the economy.

* Tom Arms is foreign editor of Liberal Democrat Voice and author of “The Encyclopaedia of the Cold War” and “America Made in Britain". To subscribe to his email alerts on world affairs click here.

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14 Comments

  • nigel hunter 4th Jun '23 - 10:40am

    US and America have an ageing population.Surely allowing migrants in to assist in socially necessary jobs is required.’Hand outs to the elderly’ is an insult when the people involved both in US and UK have contributed taxes for the ‘hand outs’.In other words for benefits they have worked for.
    Is Orban happy to continue his oil and gas from Russia to maintain his power base for going for wind, solar, etc. may weaken his position?

  • @nigel – “ Surely allowing migrants in to assist in socially necessary jobs is required”

    Seems reasonable, but much depends upon the policy.
    Remember this has been the approach of the UK for circa 25 years to solve our “baby boom” problem. Only problem the approach adopted has compounded the problem – you only need to look at the number of school places today with that of the baby boom peak to see a massive increase and thus an even larger future aging population…

  • Peter Martin 4th Jun '23 - 1:08pm

    “The problem that both parties face is that there is virtually no room for discretionary spending cuts”

    An even bigger problem is that, even if there were, these wouldn’t reduce the deficit in anything like the anticipated way. The US government creates $$ as it spends into the economy and destroys $$ as it taxes them out again. The difference between these amounts is the Federal deficit. It is easy enough to understand that if government spending is cut then its taxation revenue will also fall. The gap between may well even increase.

    Of course in the extreme limit that the Government spends very little then the gap will indeed close. This however means virtually shutting down the entire US economy in the pursuit of some ideological objective and which neither side of the US political divide would knowingly wish for.

    There may be some case to tighten US fiscal policy at present due to inflationary considerations. If this is anyone’s motivation, this is what they should argue for.

  • Martin Gray 4th Jun '23 - 1:56pm

    Net Immigration is close to record levels …
    The public want failed asylum seekers returned forthwith..
    Every proposed large asylum centre has met with bitter opposition locally ..
    Our social housing waiting list has over 1 million applicants …
    How many more should we be advocating ?

  • Jenny Barnes 4th Jun '23 - 5:01pm

    “Net Immigration”…
    When all you have is a hammer, everything looks like a nail.
    Over the last 40 years there has been very little social housebuilding, following the sainted Thatcher’s sell off of council housing. That’s why we’re short of housing.
    The Tories have underfunded the NHS for the last 13 years. You can get away with that sort of thing for a year or two, but sooner or later lack of maintenance catches up with you – see the effects of Covid19 on a hollowed out health service. Would you believe it, the government/NHS are recruiting nurses and doctors from overseas (aka immigrants) to fill the vacancies created by not training enough of our own people.
    Fruit Pickers, HGV drivers, care workers, butchers….

  • Martin Gray 4th Jun '23 - 5:43pm

    @Jenny …Correct . But adding the size of a small city to the populus every year is unsustainable.
    The conservatives underfund a lot of things, but continue to get elected time & again ..

  • @ Martin Gray Do you agree with three house owner immigration Minister Robert Jenrick MP’s (one a Grade 1 listed manor house, the others in London) plan that asylum seekers should share four to a room accommodation, Mr Gray ?

  • Steve Trevethan 4th Jun '23 - 8:24pm

    Might encouraging peace negotiations between Russia and Ukraine benefit U. S finances?

    Ditto the U. S and China?

  • Martin Gray 4th Jun '23 - 8:36pm

    Where the Hungarian government purchases its oil & gas from is its own business…

  • Jenny Barnes 5th Jun '23 - 11:11am

    “adding the size of a small city to the populus every year is unsustainable.”
    You’re probably right, when it comes to world population. Currently 8Bn, and expected to rise to 10 Bn, although after that (on BAU assumptions) it would start to drop. BAU assumptions really don’t work for our present multi crises, however.
    I suspect that the sustainable carrying capacity of the planet is in the region of 1.5Bn. I don’t see a pleasant way to get there any time soon.

  • > But adding the size of a small city to the populus every year is unsustainable.

    Currently, that’s more than 2 Milton Keynes per annum. It is useful o look at things in this way as it makes obvious all the economic development and activity necessary just to service this population.
    MK was the largest new town envisaged in the 1960s with a target population of 250,000; its 2021 census population was 288,000. This was achieved by continuous construction over 50 years…

  • @Jenny – world population growth over the past 50+ years has averaged a little over 2% pa. That’s how 3bn in 1970 has become more than 8bn today…
    Interestingly, global GDP has mirrored this, which would indicate the GDP growth (which some are obsessed with) we are seeing is largely an illusion…

  • Martin Gray 5th Jun '23 - 12:40pm

    @David Raw…

    If I was fleeing persecution & my life was in absolute danger – having a roof over my head in a safe country – be it a hotel or hostel, irrespective of who else is in that room – I’d be eternally grateful ….

  • Just watched Nicki Haley at a CNN Town Hall meeting. Clearly taking a much more internationalist view of the world, championing Ukraine support and trying to get some sort of consensus over Abortion. Distinctly not the Trump, De Santis lines.
    If she got the nomination she would probably surge through in November 24.

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