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 Encyclopedia of the War” and the recently published “America Made in Britain". He has a weekly podcast, Transatlantic Riff.