Russia plays hardball over grain: On Tuesday, Russia threatened to scrap the grain deal with Ukraine brokered by Turkey and the United Nations after it expires on May 18. Moscow has consistently leveraged these renewal periods to press for more concessions on the deal, and only agreed to a 60 day extension in March. U.N. Secretary-General Antonio Guterres sent a letter to all parties outlining a way forward, but thus far no details of the plan have emerged.
What we are watching: Are the scales tipped toward Moscow this time?
As I have written before, this deal has kept millions of vulnerable people around the world from deprivation and hunger by stabilizing global food supply chains. Its role in U.S. strategy is probably underappreciated, as the countries that benefit the most tend to try to keep a healthy non-committal position in the conflict between the United States and Russia. But if the grain stops flowing and people begin going hungry, governments across Africa and South Asia may find themselves under tremendous pressure that Moscow might leverage for its own ends.
And unlike in previous cycles of renewal negotiations, Ukraine’s allies in Europe are facing domestic discontent over the policy. Farmers in Eastern Europe are finding themselves financially ruined by an overabundance of cheap Ukrainian foodstuffs allowed into E.U. markets by emergency war-related measures. Even Brussels acknowledged urgent action was necessary, allowing multiple unilateral bans on Ukrainian grain imports in member states to go forward as a stopgap measure while a longer-term solution is negotiated.
We’ll cover Russia’s demands as negotiations proceed, but keep your eye on the G-7 for now. That’s because G-7 countries, which meet for their annual summit on May 19, are considering a near total ban on exports to Russia.
Lula’s foreign policy high-wire act: Some of Brazilian President Luiz Inácio Lula da Silva’s recent comments on trips abroad, particularly about his relationship with China and position on the invasion of Ukraine, have caused consternation in the United States and among its allies. He suggested implementing a new trade currency among BRICS members (Brazil, Russia, India, China and South Africa) to circumvent the U.S. dollar’s primacy on foreign trade, and urged Ukraine to seek peace with Russia.
What we are watching: Can Lula Sustain the balancing act?
To be fair, Brazil is heavily dependent on Chinese trade and striking a middle path in global power struggles is standard Brazilian foreign policy. For example, people famously said “snakes will smoke” before Brazil would enter World War II (though in the end, the “Smoking Snakes” of the Brazilian Expeditionary Force fought in Italy).
And that’s the key point: Brazil is arguably the juiciest peach in the basket for Washington, Beijing and Moscow when it comes to swaying middle powers. Its economic, political and military clout can make a difference in the trajectories of global politics and trade in ways most other countries that sit on the fence just can’t. So when Lula says he wants to implement a BRICS trade currency and urges Ukraine to make concessions to Russia, it’s harder for the United States to let it slide. We’ll be watching for any sign Lula may be ready to make a gesture to appease Washington.
China turns up the heat on American companies: Chinese police raided the Shanghai offices of Bain & Company, an American management consulting firm, this week in what some suspect is the preface for a potential crackdown on American companies. Less than a month earlier, police detained Chinese employees of the Mintz Group, another consultancy, and held them overnight before notifying their families.
What we are watching: Will Beijing begin to target more economically vital businesses?
Bain and Mintz fulfill somewhat niche roles in the Sino-American economic relationship, helping American firms conduct due diligence on deals and providing corporate advice. A crackdown targeting such companies would send a crystal clear message about Beijing’s position on American economic containment strategies without fundamentally breaking trade. Targeting companies that actually produce goods or which render services that are more consumer-facing would be a serious escalation.
