August 28, 2020

China launched four medium-range “aircraft carrier killer” ballistic missiles into the South China Sea during military exercises on Wednesday, which has been widely interpreted as a warning to U.S. aircraft carriers in the area, and to U.S. military bases in the Asia-Pacific. China’s territorial claims in the South China Sea have long been a point of contention in U.S.-China relations (and in China’s relationships with Southeast Asian countries whose territorial waters it lays claim to). Up to this point, however, the U.S. has pursued a policy of neutrality in regional territorial disputes, limiting its actions to freedom of navigation exercises and naval support for countries whose claims to the South China Sea overlap with China’s, and whose commercial ships have been harassed at sea by Chinese vessels. In recent weeks, however, the U.S. approach to the conflict has taken a more aggressive turn. Secretary of State Mike Pompeo called China’s claims to the South China Sea “completely unlawful” in a speech on July 13, echoing the 2016 ruling of an international tribunal at the Hague. That same month, the U.S. stepped up military presence in the area by deploying two new aircraft carriers in waters that fall within the boundaries of China’s territorial claims. And this week, the U.S. announced new sanctions on 24 Chinese companies in connection with their contributions to China’s build-up of artificial islands in the South China Sea for military purposes. As the U.S. ups the pressure on China, it will have to carefully calibrate its actions to stay the course without crossing a line beyond which Beijing feels compelled to respond. We do not think either side is seeking outright conflict, but as this cycle of response and counter-response continues, the margin for error will continue to shrink.

Mexican President Andrés Manuel López Obrador (AMLO) seeks to expose past corruption in Mexico as the economy shrinks to Great Depression levels and Covid-19 deaths continue to climb. This week, AMLO proposed the possibility of a popular referendum to decide if five past presidents should be charged with corruption. If the Supreme Court deems it constitutional, the National Electoral Institute will organize the referendum on former presidents Enrique Peña Nieto, Felipe Calderón, Vicente Fox, Ernesto Zedillo, and Carlos Salinas. The move would be unprecedented in Mexico and, coming ahead of the country’s 2021 midterm elections, could have political consequences. AMLO came into office in 2018 with a pledge to weed out corruption in Mexico, and his referendum proposal is part of a recent escalation of his anti-corruption campaign. It also comes less than a week after Emilio Lozoya, the former head of Mexico’s state-owned oil company Pemex, accused 17 former Mexican officials (including Peña Nieto and Calderón) of corrupt dealings worth millions. While AMLO has support from his political party Morena to go after his predecessors, critics believe his anti-corruption campaign is politically motivated and an attempt to distract from his handling of the economy and the pandemic. Mexico’s economy could shrink as much as 13% in 2020, according to the central bank, and Covid-19 deaths have surpassed 62,000.

Russia has rejected international calls for an investigation into the poisoning of opposition leader Alexey Navalny on a flight from Moscow to Tomsk, Russia last week. German doctors have determined that Navalny, who is currently in a medically induced coma in a hospital in Berlin after being evacuated from a hospital in Omsk, was poisoned with cholinesterase inhibitors. Russian doctors who treated Navalny claim no evidence of poison was found. Cholinesterase inhibitors are sometimes used for military purposes, such as in nerve agents like Novichok, which was used in the poisoning of former Russian spy Sergey Skripal in 2018. Skripal’s poisoning is just one of a string of high-profile poisonings believed to have been carried out by Russian security services, which featured prominently in attacks on opponents of the Kremlin in the Soviet era (and before), and more recently against people like Russian defector Alexander Litvinenko in 2006 and former Ukrainian president Viktor Yuschenko in 2004. While firm proof has not yet emerged that Navalny’s poisoning was state-sanctioned, it fits a well-established pattern, and is cementing the perception in the international community that the Russians are willing to engage in reckless extralegal assassinations – both in Russia and abroad – without fear of punishment. While it is true that the international community has limited options for a formal response, this incident will likely further isolate Russia from its western allies whose markets it will need to pull the country out of a deep Covid-19-induced recession. The World Bank has forecast that the Russian economy could contract by as much as 6% this year.