The Arkin Group

February 12, 2021

Cuba announced this week that it will open up its economy to expand private businesses on the island. The economic reforms announced by the Communist government will allow for more Cubans to become “cuentapropistas” or entrepreneurs – a sign that the state recognizes the need to push for economic growth since the contraction seen as a result of the pandemic. Reportedly, the Cuban economy has shrunk by 11% since the start of 2020. The new reforms will expand the number of legal economic activities in Cuba from 127 to 2,000. Other reforms launched on January 1 include a “monetary reordering,” which effectively devalued the Cuban peso against the U.S. dollar and eliminated the use of the “convertible peso,” which was a secondary currency in circulation. The government has also removed subsidies on some goods. The reforms are seen as a positive and overdue step to reduce the state’s role in the economy and increase economic activity and opportunity, but there are still restrictions. For example, major industries like sugar and tobacco are left off the list, and the government will continue to control the healthcare, education, and communications sectors in Cuba. There is no indication that the economic reforms will lead to political opening, either. Still, they are a sign that the Cuban government is willing to reduce its role in the economy, and these will be welcome changes from Washington’s perspective as the Biden administration looks to revise U.S. policy toward Cuba.

Germany, Poland, and Sweden each expelled a Russian diplomat stationed in their respective countries following Moscow’s expulsion of their envoys for attending protests in support of Alexey Navalny, though spokespeople for Germany and Sweden noted that observing the demonstrations was part of their diplomats’ professional duties. German chancellor Angela Merkel also said the country reserves the right to impose sanctions on Russia and individuals involved in the poisoning and imprisonment of Navalny. President Biden called for Navalny’s immediate release in a speech last week, in which he said the days of the U.S. “rolling over” to Russian aggression are over. And while he moved quickly to extend the New START treaty limiting Russian and U.S. nuclear stockpiles, he has also sought to reverse the previous administration’s approaches to major flashpoints in the U.S.-Russia relationship, including withdrawal of troops from Germany and alignment with NATO more broadly. And Russia shows no signs of backing down – on the contrary, punitive sanctions under the Trump administration were met with increasingly aggressive and sophisticated cyberattacks, along with a continuation of efforts to wage disinformation warfare. Even now, Russia is employing its news outlets in a disinformation campaign promoting its own vaccine and disparaging U.S.- and European-made ones in Latin America. The stage is set for a prolonged and potentially escalating period of confrontation with Russia, one that ideally will end with a new set of rules of engagement that encompasses modern tools of warfare, particularly cyber and social media. Until then, we anticipate more diplomatic tit-for-tats, and as news continues to trickle out about the SolarWinds hack and/or continued political repression related to the Navalny case, some new sanctions against Russia, as well.

A WHO team investigating the origins of the Covid-19 pandemic in Wuhan, China has released a statement that effectively debunks theories that the virus was released – accidentally or otherwise – from a Chinese lab. The findings do not completely absolve Beijing of failing to act swiftly and transparently to prevent the virus from spreading globally. However, had they indicated that the deaths of more than 2 million people worldwide and a broad swath of economies in recession or depression were the result of carelessness by Chinese scientists, the geopolitical impact would have been severe and potentially destabilizing. Unfortunately, the WHO damaged its credibility early on in the battle against the pandemic by claiming that China had been cooperative and transparent when initial investigations were underway. Leaked audio from internal WHO meetings conducted early in the pandemic reveals that the organization’s officials were privately complaining about China’s lack of transparency, even while they publicly praised Beijing for its transparent cooperation. Until findings are made fully public, international observers are likely to maintain a healthy degree of skepticism regarding the actual origins of the virus and Beijing’s role in a cover-up. Reports of the first phone call between Presidents Xi and Biden suggest that the U.S. will put the focus squarely on cooperation in ongoing handling of the Covid-19 pandemic – and preventing a future one – though any concrete findings that political considerations in Beijing interfered with an effective response may complicate that approach.

For more on Russia, listen to TAG President Jack Devine’s recent interview with the president of the Association of Former Intelligence Officers (AFIO) James Hughes about Jack’s new book Spymaster’s Prism and Russia’s ongoing aggression against the West, including and especially the United States. Here is the link.

February 4, 2021

Russian protests are continuing – albeit in smaller numbers – following the arrest and sentencing of Kremlin critic and opposition figure Alexey Navalny, who made his name in politics with videos exposing corruption among Russia’s political elites. Navalny was detained by Russian authorities on January 17 upon returning to Moscow from Germany, where he spent months convalescing after being poisoned with a nerve agent by Russian state security. He was sentenced this week to two years and eight months in a penal colony for embezzlement and will appear in court again tomorrow to face charges of defaming a veteran of World War II. The protests that broke out just after Navalny’s return were some of the largest seen in Russia in years and were met with beatings and mass detention of protesters. Russian security forces have also detained journalists – this week a news website editor who retweeted a reference to an anti-Kremlin protest on social media was given 25 days of jail time. The harsh crackdown may be effective in quelling visible unrest. Putin remains broadly popular across Russia, and since the fall of the Soviet Union, political activism among ordinary Russians has not managed to engender the kind of change that pushes the country in a more democratic (or just) direction. That said, escalating expressions of popular discontent are unpredictable, and there is no way to pinpoint the moment when momentum will convert a large-scale protest into a full-scale movement. Even if Russia is not yet at that point, activity on the ground suggests that despite Putin’s strong approval ratings, dissatisfaction with the ruling class is more widespread and runs deeper than the numbers might suggest. And these protests are a test not only for Russia’s domestic policy, but for U.S. foreign policy under President Biden. How the new administration addresses Russia in the wake of the Navalny sentencing and protests – as well as other instances of authoritarianism, human rights abuses, and crises of democracy around the world, such as this week’s coup in Myanmar – will be telling as to the U.S.’s overall foreign policy direction over the next four years.

Venezuelan opposition leader Juan Guaidó received a boost of confidence from the United States this week, even as Venezuelan President Nicolás Maduro remains in power. On Wednesday, U.S. State Department spokesperson Ned Price noted that the Biden administration continues to recognize Guaidó as the legitimate interim leader of Venezuela and ruled out possible talks with Maduro. Guaidó declared himself the legitimate leader of Venezuela in 2019, and since then he has been recognized by more than 50 countries, including the U.S. and the EU. Last week, the EU issued a statement again condemning the Venezuelan government for fraudulent parliamentary elections held on December 6 and blamed Maduro for the ongoing political, economic, and humanitarian crisis in the country. While Guaidó has managed to retain international support, he remains an opposition figure in the country with no control over the Venezuelan government, military, or security forces. Further, his opposition coalition appears shaky, he lost his leadership position within the National Assembly, and average Venezuelans seem to have given up on protests as a way to oust Maduro. Still, supporting Guaidó serves to deprive Maduro of the international recognition and legitimacy he craves. The Biden administration is likely to use targeted sanctions to go after Maduro and his cronies for corruption, drug trafficking, and human rights abuses, and will work with the EU and Latin American partners on a multilateral approach to Venezuela. Whether the U.S. will lift existing oil sanctions on Venezuela, however, remains to be seen.

China has announced plans to donate coronavirus vaccines to Zimbabwe, Guinea, and Sierra Leone and help another 38 developing countries procure shots in the latest salvo in its Covid-19 assistance/vaccine diplomacy drive. The Zimbabwean and Guinean governments announced that China would donate 200,000 doses to each of their vaccination effort. The number allocated to Sierra Leone has not yet been announced, nor have plans for assistance to other developing countries. Widespread inoculation is critical to getting the virus under control, and programs to assist countries that have neither the capacity to develop their own nor the funds to pay market rates to procure them should be applauded. However, China has a history of turning foreign aid to its economic advantage. China has been the most important source of direct lending for a number of sub-Saharan African countries over the last 10+ years, but predatory lending practices – sometimes called “debt trap diplomacy” – have in some cases meant that governments are forced to use state-owned resources, such as oil, minerals, or port access as collateral for debt they could not otherwise service. This strategy has been employed not only in sub-Saharan Africa, but worldwide, with high-profile examples including China’s oil-for-loans deals with the cash-strapped governments of Ecuador and Venezuela. Expanding vaccinations in sub-Saharan Africa and elsewhere is to the benefit of both the countries receiving the shots and the broader international community, but recipient countries should be wary of the possibility that Beijing will expect favorable treatment in the future in exchange for its generosity.

January 29, 2021

Tens of thousands of Russians (possibly as many as 100,000) took to the streets last weekend in cities across the country to protest the arrest of opposition leader Alexey Navalny upon his return from Germany, where he was treated and convalesced after being poisoned by Russian state security services in August. More than 3,700 protestors were arrested, and video and photographic evidence of violent clashes and police beatings have been widely shared over the internet. Later in the week, authorities arrested Navalny’s brother and another close ally and a Russian court struck down an appeal of Navalny’s arrest. More demonstrations are planned for this coming weekend. Navalny claims that his arrest was politically motivated (a claim many consider credible). He rose to international prominence via a series of videos detailing corruption allegations against high-ranking Russian officials, including one that was put online the day after his return to Russia that purports to be footage of a $1 billion+ mansion/compound belonging to President Putin. Navalny’s poisoning and arrest – and what they imply about corruption and political repression in Russia – are not the only cause for discontent. Also at issue is the Russian economy. The Covid-19 pandemic and resulting impact on oil demand and prices has contributed to high unemployment and a sharp devaluation of the ruble, along with declining living standards and rising inflation. Despite the hardships facing Russians and their show of dissatisfaction with the government, we do not consider Putin or his allies in the Kremlin to be in political jeopardy. However, these protests, which follow a similarly surprising show of anti-Kremlin force as the October 2020 protests in Russia’s far east, suggest that the anger under the surface may be more powerful than is currently visible, and may also be growing. This is a situation that merits careful monitoring, both by the Kremlin and by those looking for signs of impending change in Russia.

Mexican President Andrés Manuel López Obrador tested positive for Covid-19 on Sunday but continues to carry out his duties as president. López Obrador is isolated at the National Palace and experiencing only mild symptoms, according to Interior Minister Olga Sánchez, who said that he would return to his daily press conferences as soon as doctors give him clearance. López Obrador is 67 years old and considered high-risk, having had a heart attack in 2013, yet he has displayed a lax attitude toward the coronavirus for months. Mexico has recorded approximately 1,750,000 cases and 150,000 deaths from the coronavirus, and López Obrador has received much criticism for his handling of the crisis. In contrast to many other large economies, Mexico has not provided fiscal stimulus to combat the negative economic impacts of the pandemic. Even Brazilian President Jair Bolsonaro, who also got Covid and whose handling of the pandemic has been criticized, spent the equivalent of 12% of its GDP to provide assistance to its population. Mexico has dedicated a scant 0.7% of its GDP to address the crisis, and its economy in 2020 shrank by 8.5%, its biggest annual contraction since the Great Depression. Even though Q4 saw some recovery, economists are now concerned that surges in the virus – particularly in and around Mexico City, which is experiencing new restrictions to slow the spread – could halt growth in Q1 2021.

A documentary detailing the origins of the Covid-19 pandemic in Wuhan, China is expected to paint a damning picture of alleged attempts to suppress information about the outbreak and will almost certainly elicit a fierce backlash from Beijing. Reports suggest that the film, set for release by HBO later this year, persuasively contradicts the narrative that China’s handling of the virus was a success. China has long resisted a thorough accounting of where the virus originated and how it spread, leaving an information vacuum that gave rise to numerous theories (including some of the tin foil hat variety). While Beijing’s goal may have been to downplay any responsibility for a pandemic that has killed more than 2 million worldwide, its secrecy fueled speculation that there was something incriminating to hide. Adding to that speculation are recordings of WHO officials from early on in the pandemic, leaked to reporters, complaining of a lack of transparency on China’s part. China has made a priority of casting its role in containing and battling the virus in a positive light. The country was quick to offer international assistance (with mixed success – several countries reported that Chinese-made Covid tests were faulty) and is suspected of attempting to steal vaccine research in an effort to take the lead in developing an effective shot. Beijing even released its own government-made film last week, “Heroic hymn of the people,” to disseminate its narrative about how events unfolded. A WHO team deployed to Wuhan to for a long-delayed investigation of the pandemic’s origins was released from quarantine yesterday and is set to begin field work today. Their methods and results will be under intense scrutiny, and their findings will be critical to identifying potential sources of future pandemics and developing plans for containing the damage. Any effort on Beijing’s part to obstruct research or prevent full findings from being made public will only strengthen suspicions about China’s role in unleashing the worst pandemic in a century and undermine its attempts to cast itself as the hero.