guidance

The Weekly Rundown: Johnson's Brexit Gambit, Seeking a U.S.-Iran Opening and Trump's Trade Toolbox

9 MINS READAug 31, 2019 | 18:51 GMT
The Union Jack and the European Union flag wave outside the British Cabinet Office in London on Aug. 29, 2019, as protesters rally against Prime Minister Boris Johnson's suspension of Parliament.
(ALBERTO PEZZALI/NurPhoto via Getty Images)

British Prime Minister Boris Johnson's plan to suspend Parliament from mid-September to mid-October will leave lawmakers with little time to prevent the United Kingdom's no-deal exit from the European Union on Oct. 31.

Stratfor's geopolitical guidance provides insight on what we're watching out for in the week ahead.

On the Record

If someone wants to have their photo taken with Hassan Rouhani, it's not possible; it's possible to do it with Photoshop.

Iranian President Hassan Rouhani, in an apparent reference to U.S. President Donald Trump's comment that there's a good chance the two leaders will meet


On Our Radar

Biggering the Brexit Threat. British Prime Minister Boris Johnson checkmated his political opponents this week by getting the queen to approve a five-week parliamentary suspension from mid-September to mid-October. This effectively shaves the precious few eight weeks that parliamentarians had to try and prevent a no-deal Brexit down to just three weeks. The ultimate question remains: Is Johnson using an election date to deliver Brexit or is he using Brexit to win an election? If the latter, then Johnson is still leaving a narrow, but critical window for his opponents to move against him so that he can then launch into elections with a potent populist message to all the Tories who defected to the Brexit Party that he is their only chance at getting Brexit done.

But here's the thing that makes us really nervous about that assumption: Instead of the Parliament suspension galvanizing the opposition into accelerating a no-confidence motion against Johnson in the one week they have in early September, they are still taking the slow and inefficient approach, saying they're going to use the coming week to work on legislation for the prime minister to request another Brexit delay from Brussels, which he can just as easily reject. This may suggest that the opposition simply doesn't feel confident that it has the votes yet to pass a confidence motion against Johnson.

We also have to remember that the European Union is the other big target of Johnson's parliamentary gambit. Johnson's preference is to get Brexit with a deal that scraps the Irish backstop and therefore frees the United Kingdom from the EU customs union. If the European Union's ardent defense of the backstop is to protect fellow EU member Ireland and preserve the Good Friday agreement, then allowing a no-deal Brexit clearly does not accomplish that goal. But now that Johnson's threat to crash out of the European Union without a deal is a lot more credible, the European Union — particularly Paris and Berlin — has to scramble to see if a creative alternative can be devised. But just because Johnson has spooked the European Union doesn't mean his plan will work. EU leaders still don't want to set a precedent for other Euroskeptics on the Continent by bending to radical tactics when a state leaves the bloc. With British and EU negotiators now expected to meet twice a week to hammer out a plan, we should get a sense of whether an EU-U.K. backstop compromise is in the offing ahead of a critical Oct. 17 European Council meeting.

The Iran Negotiation Experiment. It appears that the Iranian strategy to cope with the Trump White House is yielding results. After establishing a credible military threat in the Strait of Hormuz through brazen oil tanker attacks — and exposing U.S. President Donald Trump's extreme reticence to go to war in the process — Iran is now entertaining an offer from French President Emmanuel Macron for a $15 billion credit line to increase its oil exports. But can Macron sell Trump on the idea to secure the necessary sanctions waivers? While Trump seems open to the idea, there is still a question as to what Trump will expect in return for this slight easing of sanctions pressure. Is restraint on the nuclear and military fronts enough as he tries to keep all war options off the table heading into 2020, or will he (more characteristically) see Iran's tepid engagement as a sign of capitulation and thus an opportunity to double down on his demands? We should know within the coming days whether Macron's diplomatic experiment has a pulse. Sept. 6 is the next Tehran-issued deadline for Iran to increase its nuclear activities. If Iran shows restraint, then a de-escalation path looks more viable. At the same time, we have to watch for any spoilers. Israel sees the Trump presidency and the lead-up to 2020 as a potential closing window of opportunity and wants to use this time to maximize pressure on Iran. We're watching to see if an impending confrontation between Israel and Hezbollah stays contained and whether retaliation by Iran-backed militias against Israeli strikes in Iraq, where U.S. targets are more prevalent, ends up drawing in the United States and leading to another flare-up with Tehran.

Narrowing Options in Hong Kong. As we enter another weekend of unrest in Hong Kong, speculation has been rising that the Hong Kong government may resort to invoking a colonial-era emergency regulations ordinance that would give Hong Kong authorities sweeping powers to make arrests, take control of critical transport hubs, change laws and censor media. Given that an extradition bill was the spark for this three-month-and-running uprising and that the arrests and detention of protest leaders so far have only galvanized the movement, this would likely be a last resort by the Carrie Lam government before it resigns itself to an intervention by Beijing.

Another Big Stressor for the Semiconductor Industry. Japan is squeezing South Korea's semiconductor industry through trade attacks while U.S. chipmakers are still waiting to see if they'll get cut off from selling to Huawei as the U.S.-China trade war persists. In another potentially massive disrupter to the tech industry, GlobalFoundries, one of the world's largest semiconductor foundries, launched a lawsuit against Taiwan Semiconductor Manufacturing Co. (TSMC), alleging that its chipmaking rival was infringing on its patents in the United States and Germany for manufacturing certain semiconductors. TSMC is the world's largest pure-play foundry that fabricates chips for other companies and holds nearly a 50 percent market share in the space. GlobalFoundries is hoping to block TSMC products from being imported into Germany and the United States. Though it's too early to tell which way this case goes, a ban on TSMC imports has the potential to upend global tech supply chains since it could affect every single iOS device and Apple product using the company's A-series of chips (iPhones, iPads, Apple Watch, Apple TV, etc.), Nvidia's graphics processing unit, Google's Pixel phones, Lenovo's laptops and Cisco's routers.

Default Risk Is Back in Argentina. Argentine President Mauricio Macri is losing control of the economy after a fateful primary election on Aug. 9 pointed to a strong likelihood of Peronist candidate Alberto Fernandez winning the Oct. 27 presidential election. In a desperate attempt to keep the peso from devaluing further, Buenos Aires announced a plan to extend the maturity of some of its debt so the government can secure an extra $7 billion to shore up the peso. Buenos Aires also wants to postpone the repayment of some $44 billion in loans from the International Monetary Fund that are due in 2021 — a proposal that will put the disbursement of future tranches of the current program at risk. While Macri's administration insists that this is a "voluntary reprofiling" of some of its debts, many (including ratings agency Standard & Poor's) believe that this is still a technical default. We should know in the coming weeks what the IMF's verdict is and whether it releases the next $5.3 billion tranche.


On Our Minds

What's Next If Trump Tires of Tariffs? Despite vague and exaggerated claims by President Trump of U.S.-China phone conversations over the past week, the White House looks set to impose a 15 percent tariff on around $125 billion worth of Chinese goods, including baby clothes, shoes and smart speakers, on Sept. 1. China is expected to retaliate to this round of tariffs with tariffs on U.S. soybeans and other farm goods while still leaving the door open for dialogue. Beijing has also signaled that it won't go down the tariff spiral for now by retaliating to Trump's most recent retaliatory threat of raising existing 25 percent tariffs on Chinese goods to 30 percent on Oct. 1. Now that everyday consumer goods are being affected, Beijing is watching and waiting to see if Trump will come under enough political pressure to ease up on his demands and agree to tariff removal (as opposed to mere delays) to keep the negotiation alive. But Beijing still has to prepare for a no-deal scenario, and that means bracing for further escalation ahead. In total, Trump has either imposed or threatened tariffs that cover more than 95 percent of imports from China and he is no closer to a deal. As the efficacy of those tariff threats declines, Trump is likely looking at other levers in the U.S. economic toolkit to use against China. That could still entail the threat of using the International Emergency Economic Powers Act to block U.S. companies from doing business in China. It's an extreme tactic, but this trade war is also in extreme territory now.

Bolton and the Battle for Belarus. U.S. national security adviser John Bolton may have been largely sidelined from North Korea, Venezuela and Iran policy, but he is still going strong in shaping U.S. containment policy toward Russia. To that end, Bolton has been busy frequenting the Eastern European borderland states, including most notably a visit with Belarusian President Aleksandr Lukashenko in Minsk — the highest-level visit by a U.S. official to the country in 20 years. While Bolton touted efforts to increase U.S. military ties with neighboring Ukraine and Moldova, no such pronouncements were made after his meeting with Lukashenko. This is not surprising, given Belarus' close security and strategic ties with Moscow. The question then is what — if any — carrots the United States can realistically offer Belarus to draw Minsk a bit further away from Moscow's orbit and a bit closer to Washington. Given U.S. plans to increase its military presence in Poland, the best Bolton can probably hope for is to offer economic and security incentives to mitigate any Russian reciprocal buildups in Belarus. We still have to see whether a strategic intent to distance a key Russian ally from Moscow will translate into concrete offers.


In Case You Missed It

The Saudi Monarchy Catches Up With Its Millennials

How an Indian Kashmir Fits Into Modi's Grand Plan

Examining Whether the Terrorism Label Applies to Antifa

Tunisia's Budding Democracy Faces Its Biggest Test


On Our Calendar

In the coming week, U.S. Vice President Mike Pence visits Iceland and Ireland and Russia hosts the Eastern Economic Forum. For more, see our Geopolitical Calendar.


Stratfor Talks

For the Stratfor podcast, Stratfor Chief Security Officer Fred Burton and James Grady, author of Six Days of the Condor, discuss what makes today's world infinitely more vexing when it comes to security, geopolitics and diplomacy compared with the days of the Cold War.

Visit our podcasts page for more conversations on geopolitics and world affairs with Stratfor's analysts, editors and contributors.

Article Search

Copyright © Stratfor Enterprises, LLC. All rights reserved.

Stratfor Worldview

OUR COMMITMENT

To empower members to confidently understand and navigate a continuously changing and complex global environment.

GET THE MOBILE APPGoogle Play