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Blackwater USA – Daily Brief

China

  • The head of Beijing’s Hong Kong and Macau Affairs office said that Hong Kong’s crisis “is getting worse and worse,” and is now the most significant upheaval in the territory since British rule ended in 1997. However, I didn’t see any other big news out of Hong Kong today.

DRC

  • Glencore announced that it’s shuttering the world’s largest cobalt mine at Mutanda because it’s “no longer economically viable” under today’s crushed cobalt prices and higher costs—via DRC’s new higher tax rates and rising input prices (Glencore specifically mentioned sulphiric acid). See the short Financial Times article below for more detail.
  • In the same announcement, Glencore posted a drop in 1H core profit of almost a third vs. 2018, largely because of low cobalt prices. I wouldn’t be surprised if shuttering Mutanda is only the first of many steps that Glencore will take in retreat from DRC, where most of its current troubles started.
  • Separately, Rwanda has tightened its border screening mechanisms to prevent Ebola from crossing into the country from DRC, but—at the same time—its health minister met with his DRC counterpart to craft a joint plan to fight the virus. They aim to come up with something they can present to the WHO—which they likely hope will fund it.

Venezuela

  • Pres. Guaido seems to think the new U.S. embargo on Pres. Maduro’s government will help state-owned refiner Citgo—which the media often calls Venezuela’s “crown jewel”—avoid looming bond payments and, ultimately, block its seizure by creditors. I’m not sure of the mechanics, but the WSJ says the new executive order overrides a previous Treasury ruling that would’ve allowed bondholders to seize Citgo’s assets.
  • Meanwhile, Maduro’s government issued a travel warning urging its citizens not to travel to the U.S. because of recent mass shootings. Of course, that’s just a political move. More oddly, Uruguay and Japn also issued a U.S. travel warning over the shootings.

DPRK

  • North Korea is upset that the U.S. and South Korea are conducting military exercises this week, and threw another missile test tantrum—this time lobbing two short-range missiles off its eastern coast. Kim Jong Un called it a warning to the U.S. and South Korea.

Syria

  • U.S. officials reportedly plan to present Turkey with a final offer for what to do with Syrian Kurdish fighters. Turkey has threatened to invade northwest Syria to deal with them itself if it doesn’t see an adequate solution soon.

India

  • India’s parliament approved PM Modi’s decision to withdraw Kashmir’s special status, as expected. Kashmir is still reportedly calm, though comms are shut down and thousands of Indian soldiers are patrolling the streets to prevent unrest, so it’s hard to tell what Kashmiris actually think about the change.
  • The WSJ thinks that India’s chess move on Kashmir is going to distract Pakistan from participating in Afghan peace efforts, and could ultimately stall the whole process, since Pakistani support is such an important part of it. Article pasted below.

Afghanistan

  • Back in Doha, both the Taliban and the U.S. say they’ve resolved their differences, and U.S. envoy Zalmay Khalilzad said he expects a final deal by September 1.
  • Meanwhile, the Taliban claimed a large explosion that targeted a police station in western (Shia) Kabul. The casualty count is still hazy, but it appears that most of the 95 reported injured were women and children—which makes the immediate Taliban claim odd, given that the Taliban usually tries to distance itself from attacks that cause significant civilian casualties.
  • RFE/RL reports that the ANA is being besieged in Uruzgan’s Charghina, and is begging Kabul for unforthcoming reinforcements after a week of Taliban onslaught.

Libya

  • Khalifa Haftar’s LNA says it used a drone to destroy a Russian-made Ilyushin-76 carrying weapons to its rival GNA, and warned “foreign countries” (without naming any specifically) not to arm the GNA. The plane was Ukrainian owned, and claimed to be ferrying humanitarian cargo to the GNA’s Red Crescent, but the LNA seems to think it was actually carrying Turkish weapons to the GNA.
  • The GNA, meanwhile, allocated a further $28.5 million to the defense ministry for the war. That’s not a huge deal, especially in comparison with the $1.43 billion it approved for soldiers’ medical treatment back in April, but it also granted a very generous 3,000 dinars ($2,100) to each soldier fighting the LNA.
  • The GNA seems to make most of its money from a hard currency transaction fee on oil and gas revenues, which doesn’t seem very sustainable to me—especially if it keeps ramping up defense spending like this.

Iran

  • Politico, which leans left, reports that the U.S. is rebranding its effort to attract other countries to its maritime escort initiative in the Strait of Hormuz to sound less tough (“Operation Sentinel”) and more inviting. U.S. allies in the EU have seemed hesitant to join, for fear of being drawn into the fray.

Russia

  • U.S. Ambassador to Russia Jon Huntsman resigned, and there’s speculation that he plans to run for governor of Utah. The timing is odd, though, because the National Security Council’s top expert on Russia also recently resigned—as did Dad Coats, the DNI who reportedly disagreed with Pres. Trump on Russia strategy.

Other News

  • The World Resource Institute published a new report estimating that 17 countries—home to a quarter of the world’s population—use all the water they have, and are in danger of running out. The report partially blamed climate change for making rainfall unpredictable, but added some more practicable suggestions for remedies, like recycling wastewater and plugging leaks.

Kashmir’s Loss of Autonomy Clouds Afghan Peace Efforts (WSJ)

India’s removal of disputed region’s autonomous governing status sparks Pakistan’s anger; both nations are seen as critical to efforts to reach an accord with the Taliban

India’s historic move to end the autonomous governing status of a disputed region threatens to complicate U.S. efforts to forge a peace deal with the Taliban in Afghanistan, while Indian authorities locked down the streets of Kashmir.

The spike in tensions between Pakistan and India over the change of Kashmir’s status come as Taliban peace talks appear to have reached a critical final stage. Senior U.S. officials flew into New Delhi and Islamabad—trips they and their host countries said were planned before India acted on Monday—as Washington sought to build regional support for a critical agreement with the Taliban that Pakistan is expected to play a key role in helping deliver and U.S. officials hope India will support.

Pakistan said the tensions with India force Islamabad to focus its attention and troops on its eastern border with India, not its northwestern border with Afghanistan. In the 1990s, India and Pakistan conducted a proxy battle in Afghanistan, fueling a civil war there, and even after 2001, New Delhi and Islamabad saw themselves as backing different sides.

Pakistani Prime Minister Imran Khan even warned that India’s actions could trigger a war.

While India regards Kashmir’s status as a domestic matter, its move to put separate disputed parts of it claimed by Pakistan and China under New Delhi’s direct control has broader implications in a region where the two nuclear-armed countries have fought multiple wars against India, which also is nuclear armed.

Kashmir was quiet on Tuesday, as telephone and internet connections were suspended. Authorities, backed up by thousands of paramilitary soldiers that were added to the usual heavy military presence over the weekend, imposed a complete ban on meetings and rallies, kept local political leaders confined to their homes, closed schools and restricted public thoroughfares in the capital Srinagar, local police said.

China said the Indian move would “undermine China’s territorial sovereignty,” while Pakistan’s army chief said his country would go to any extent to support Kashmir’s population against New Delhi’s action to exercise more control over the area.

Indian leaders say the state’s autonomy, first granted in 1950, encouraged militancy and separatist sentiment and removing it would help attract investment and improve economic ties to the rest of the country.

The Kashmir turmoil, however, could threaten the Trump administration’s push for a deal if Pakistan-India tensions become a lasting distraction or spill over to a fresh military confrontation. They exchanged airstrikes in February, and almost continuously exchange gun and artillery fire across a line of control in Kashmir where their two armies have faced off for many decades.

The Trump administration invited Mr. Khan and Gen. Qamar Bajwa, the powerful head of Pakistan’s army, to Washington in July to enlist further help in persuading the Taliban, whose leadership is based in Pakistan, to agree to a cease-fire and deal directly with the Afghan government about the country’s future—key elements of any deal for U.S. officials.

The Pakistani officials, who held high-level meetings in Washington, were thrilled when President Trump created an uproar by saying he had been invited by the leaders of India and Pakistan to mediate the Kashmir dispute.

Pakistan has long called for international intervention in Kashmir, but India reiterated that it has long refused any third-party involvement, making clear it hadn’t invited Mr. Trump to intervene.

The Pakistanis’ successful Washington visit may have persuaded Prime Minister Narendra Modi and his dominant Bharatiya Janata Party to press ahead urgently with the Kashmir move, which the party had long advocated.

Pakistan accuses the BJP, which promotes the Hindu religion as the essence of India, of ethnic cleansing in Kashmir, a Muslim-majority area where outsiders will now be able to settle more easily.

“Trump seemed to cut some slack for Pakistan on terrorism and Kashmir in return for helping extricate the U.S. from Afghanistan. That changed the equation,” said C. Raja Mohan, director of the Institute of South Asian Studies at the National University of Singapore. “Pakistan now thinks the pressure will be on India. But the U.S. cannot force India to negotiate with Pakistan. India has learned to navigate pressures from the U.S.”

Mr. Mohan said India fears that after a settlement in Afghanistan, Pakistan would direct more of the Pakistani-allied jihadist groups, who operate in Afghanistan and Kashmir, against India.

Yet the Indian move also has provided a rallying cry for Pakistani leaders, who said it could force them to focus more effort on their dispute with India than issues in Afghanistan, where the U.S. wants their focus on the Taliban.

“We will fight to the last drop of our blood. It will be a war that no one can win,” Mr. Khan told a special session of Parliament on Tuesday. “I’m not doing nuclear blackmail, I’m appealing to common sense. Is the world prepared for the worst?”

On Sunday, amid signs a major move from India in Kashmir was imminent, Pakistan’s National Security Council, which includes the top civilian and military leadership, met to discuss the conflict and explicitly linked the deteriorating situation in Kashmir to Afghanistan.

“The forum strongly condemned such Indian strategy at this time when Pakistan and the international community are focused on resolving the Afghan conflict. The recent Indian measures will increase the levels of violence and turn this area into a flashpoint and a destabilizing factor in the midst of two strategically capable neighboring countries,” the council said after the meeting.

In India, debate over the decision continued.

Rahul Gandhi, leader of the opposition National Congress Party, which once dominated India’s political landscape, tweeted criticism of the BJP over the decision for the first time.

“National integration isn’t furthered by unilaterally tearing apart J&K, imprisoning elected representatives and violating our Constitution. This nation is made by its people, not plots of land. This abuse of executive power has grave implications for our national security,” he tweeted.

BJP supporters and other parliamentarians, however, backed the measures and they passed the lower house easily.

Glencore to halt production at world’s largest cobalt mine (FT)

Mutanda facility in Democratic Republic of Congo to be shut

Glencore is to halt production at the world’s largest cobalt mine from the end of this year following a dramatic fall in prices for the key battery metal.

The Switzerland-based miner led by billionaire Ivan Glasenberg will shut Mutanda mine in the Democratic Republic of Congo, which is also a significant producer of copper, because it is “no longer economically viable”, according to a letter to employees of the mine seen by the Financial Times.

The decision is the latest setback for Glencore in the DRC, following scrutiny of its relationships with Israeli businessman Dan Gertler and the imposition of higher taxes under a new mining code that was signed into law last year.

Glencore is under investigation by the US Department of Justice over its business practices in the DRC, among other countries. Shares in the company have fallen a fifth this year.

“Unfortunately due to the significant decrease in the cobalt price, increased inflation across some of our key input costs (mainly sulphuric acid) and the additional taxes imposed by the mining code, the mine is no longer economically viable over the long term,” the letter to employees at Mutanda said.

Glencore declined to comment. The FTSE 100 company announces its latest financial results on Wednesday.

The price of cobalt has fallen more than 40 per cent this year because of a surge of supply from the DRC, the world’s largest producer.

A critical metal for lithium-ion batteries in electric cars, the dramatic fall in prices for the metal has wrongfooted the mining and trading house. Last week, Glencore said that its trading arm would ­suffer a hit to earnings because of a ­collapse in cobalt prices.

Mutanda mine is the world’s largest producer of cobalt, which is mined alongside copper, and is one of Glencore’s key assets in the DRC. It produced almost 200,000 tonnes of copper last year and more than 27,000 tonnes, or a fifth of global supplies, of cobalt.

The decision to shut the mine comes as Glencore needs to make an expensive shift to mining a different type of mineral deposit on the site, which it has said will be more costly under the DRC’s new mining code.

The mine will keep producing until the end of this year, after which it is expected to be placed on “care and maintenance” and could eventually restart production. Glencore has previously shut production in response to low prices, curtailing its zinc output in 2015 after a fall in prices.

Valery Mukasa, the chief of staff of the DRC’s ministry of mines, said it had been informed of the decision and had no further comment.