In Other News – April 3, 2020

President Trump issued a warning (via twitter) to Iranian-backed private militias in Iraq that they will “pay a very heavy price” for carrying out a planned “sneak attack” on U.S. interests in the country. He later indicated in a press briefing that the U.S. is open to a deal with Iran, but that it is Iran’s role to initiate negotiations. Iranian-backed militias have stepped up rocket attacks on U.S. and coalition troops in Iraq and U.S. intelligence officials say that reports pointing to “imminent” attacks have become more frequent and are now coming almost daily. U.S.-Iran tensions have escalated sharply since a rocket attack in December that killed an American contractor that engendered a series of retaliatory actions, including the U.S. killing of Iranian General Qassem Suleimani. Opportunities to ratchet back the conflict are limited at present. Prospects are slim for a near-term diplomatic solution as both countries contend with severe Covid-19 outbreaks and related economic fallout, and it is not clear that Iran is in complete control of its proxies in Iraq.

OPEC+ will meet on Monday to discuss a possible deal to cut 10 million barrels a day from global oil production in coordination with other global oil producers – including the U.S. – to support oil prices. Oil prices fell below $30 a barrel, hammered by the combined impact of the coronavirus-driven slowdown in economic activity and a price war between Saudi Arabia and Russia that has flooded the market with cheap oil, but have recovered somewhat on news that a coordinated cut may be in the works. Oil-producing countries face looming budget shortfalls and significant potential for instability if oil’s price collapse leaves them unable to maintain social spending. For the U.S., the energy sector has been an economic bright spot for the past decade for both domestic production/employment and foreign trade, and low prices have already led to thousands of layoffs, exacerbating a dramatic rise in unemployment caused by coronavirus-related shutdowns. Should prices remain deeply depressed through the spring and summer, the impact on the U.S. energy sector – where production costs per barrel are higher on average than in Russia or Saudi Arabia – is likely to be severe and long-lasting. U.S. coordination with OPEC would be a first, but necessity will require the world’s largest oil producers to give quarter to avoid making an already-dire economic outlook worse. Chinese purchases may also help – reports suggest that it is capitalizing on low prices by filling its available storage capacity.

Crime rates across a multitude of categories have fallen dramatically amid urban coronavirus lockdowns all over the world, but concerns have surfaced about the potential for crimes of opportunity. The pandemic has left stores, museums, office buildings and other locations that are home to targets of value empty, which could trigger see a spike in the types of crimes that are more easily committed when people are not out roaming the streets. Earlier this week, thieves stole a Van Gogh from the deserted Singer Laren museum near Amsterdam (on the artist’s birthday). Luxury retailers in major cities like New York and Paris have removed merchandise from stores and in some cases boarded up windows and doors but looting or even small-scale smash-and-grabs seem less likely under current conditions than crimes that happen far below the radar. Organized, sophisticated criminals will likely recognize this unique opportunity for discreet illegal activities from small-scale robberies to intellectual property theft and major cybercrimes.

European countries that purchased novel coronavirus testing kits from China are saying that many of the tests are faulty and that they do not detect the virus at an early stage. The Slovak government bought 1.2 million tests from China for $16 million that it says it cannot use. China claims that the problem in Slovakia is incorrect use of the tests, but reports have also surfaced of faulty Chinese tests supplied to Spain, Turkey, and the Czech Republic. China has been playing up its success combating the virus’s spread and is seeking to establish itself as a global leader in public health assistance. But U.S. intelligence agencies have told the White House that China under-reported both cases and deaths, consistent with long-term, persistent and thoroughly justified concerns about the veracity of Chinese official data across all sectors. These doubts about the actual situation in China, along with its early cover-up of the virus, add credence to reports of faulty test kits.

In a similar shrewd public relations vein, a Russian military flight delivered medical supplies to New York on Wednesday following a Trump-Putin phone call, even as Russia continues its efforts to interfere in our political process.

With all eyes on global efforts to confront the novel coronavirus pandemic, China continues to press its claims to waters within the nine-dash line in the South China Sea, using its fishing fleet – backed by the Chinese Coast Guard – to trawl in Indonesia’s internationally recognized exclusive economic zone. Local fishermen in the Natuna Islands say that the Indonesian government has dialed back confrontations with Chinese vessels over their incursions into Indonesian waters, and that Indonesia authorities are failing to acknowledge clear-cut cases of intrusion by the Chinese. China is Indonesia’s largest trading partner and the dominant power in Asia, and while former Maritime and Fisheries Minister Susi Pudjiastuti responded forcefully to Chinese incursions, she was replaced with a more China-friendly minister in October. No regional Asian power has the might to take on China in the South China Sea, and given China’s intransigence on the issue, it is possible that nothing short of a large-scale military conflagration with the U.S. will persuade it to relinquish its extraterritorial claims.

The Trump administration is turning up the heat on Venezuela with the deployment of the Navy to bolster counternarcotics operations in the Caribbean. According to Defense Secretary Mark Esper, the goal is to increase U.S. capacity in the Western Hemisphere to go after drug cartels and organized crime seeking to exploit the current coronavirus crisis. The increased pressure on Venezuela comes a week after U.S. federal prosecutors indicted Venezuelan President Nicolás Maduro on drug trafficking conspiracy charges and days after Secretary of State Mike Pompeo proposed the formation of a transition government in Venezuela in exchange for U.S. sanctions relief. Venezuelan opposition leader Juan Guaidó also proposed forming a “national emergency government” to deal with the double threat of coronavirus and falling oil prices. Maduro has discarded such proposals and scoffed at U.S. threats. However, Maduro is increasingly vulnerable as Venezuela is ill-prepared to fend off COVID-19 and still dependent on oil exports for revenue to the state – a situation made all the more difficult since Russia’s oil giant Rosneft sold its Venezuelan assets and the IMF rejected Maduro’s $5 billion loan request.