20 countries together have aligned with the UK to expel more than 100 Russian diplomats and intelligence officers, in what is now the largest collective expulsion of Russian officers in history. While this was happening, Russia was facing one of the deadliest fires in Russian history, when a mall in Siberia caught fire with at least 64 people reported dead. Meanwhile, Trump’s ‘trade war’ could hit Australian and Japanese currencies hardest.
A not-so-diplomatic move
The UK, the US and their other Western allies have expelled dozens of Russian diplomats in response to the poisoning of Sergei Skripal, a former Russian double agent, and his daughter in the UK. Russia denies any role in the attack, though Prime Minister Theresa May has publicly alleged that Russia had full knowledge of it, and other EU leaders agreed with her.
In a surprising move (given Trump’s affinity towards Putin), the United States has expelled the most number of Russian officials: 60 diplomats. It’s a start, editorializes the Washington Post. The Russian consulate in Seattle was also closed down. However, it’s not enough.
“Russia’s malign operations in the West extend far beyond the agents it dispatches under diplomatic cover. It has an army of hackers and trolls operating online, many of whom have been busy attempting to sow confusion about responsibility for the use of the nerve agent. Mr. Putin depends on a network of government ministers and business owners to fund these operations and others — like the paramilitary force that recently attacked U.S. troops in Syria. That is the real foundation of his regime, and so far it has barely been touched.”
“Both the British government and the Trump administration have potentially potent leverage. Many Russian oligarchs and some senior government officials have millions invested in the London property market. The government of Theresa May has legal authorities it could use to target some of those assets, but it has not yet done so.”
“Both governments, as well as European Union officials, are promising further action, and we hope that it is forthcoming. But there is reason for concern, given the substantial support Mr. Putin continues to enjoy from several E.U. governments and the curious behavior of Mr. Trump, who seemingly cannot bring himself to criticize the Russian leader.”
“Getting along would be good, on the right terms. But it’s not feasible as long as the Kremlin is dedicated to disrupting Western governments and elections, subjugating neighbors such as Ukraine, and murdering its opponents in Western cities using banned chemical agents. Mr. Putin must be deterred. Expelling a few dozen of his spies is a step, but it’s not likely to suffice.”
Fire in Siberia
“The Winter Cherry mall in Kemerovo, a Siberian mining city, advertised itself as a family-friendly entertainment centre, complete with a cinema, trampolines and a petting zoo. On Sunday, when flames engulfed the four-storey building, it was filled with parents and children enjoying the first days of the school holidays. Some fled the fire by jumping from windows; harrowing footage from inside the building showed others trying to break through locked exit doors. Many did not make it out,” writes The Economist.
“As investigators seek those responsible, tales of unfathomable grief continue to trickle out of Kemerovo. A large number of the victims were children.”
Reports from Kemerovo suggest that the death toll can be higher than 64 people. When the story broke, Russian television largely stuck to regular programming and played scheduled broadcasts.
“The tragedy will test the government’s ability to manage a national incident, coming just a week after Mr Putin’s re-election. By March 26th the scale of the disaster had begun to sink in. Regional officials declared three days of mourning. Mr Putin ordered the government to organise compensation for the families of victims. National channels picked up the story, running wall-to-wall coverage. Some observers on social media wondered whether the safety problems were the result of a system whereby officials see regulations not as a way of making things safer but as a tool to hound businesses, many of which pay bribes to be left alone.”
Trump’s trade war
“A full-blown trade war between China and the United States has not yet broken out and may yet be avoided but there is a whiff of grapeshot in the air. For markets, such an atmosphere does not lend itself easily to an appetite for risk, instead fostering a demand for safe havens. That should spell volatility for the currencies of Australia and Japan,” writes Neal Kimberley in the South China Morning Post.
According to Kimberley, the Australian dollar will struggle if a China-US trade war takes places, because China is an important export destination for Australia. 66 per cent of all Australian exports go to East Asia, with almost 30 per cent being sold to China alone. “No one should underestimate the cross-border economic links between the two nations,” he writes.
“More generally, Australia’s reliance on coal and iron ore exports for use in global steelmaking only reinforces the prospect of Australian dollar vulnerability in a situation where, specific China-US trade tensions aside, US President Donald Trump has already announced tariffs on steel and aluminium imports.”
“But if the Australian dollar may be vulnerable in an unfolding scenario of heightened international trade tensions with China-US trade differences at their core, the Japanese yen might be sought after even though, as of Friday, Japan’s steel exports to the US were still subject to Trump’s tariff plans.”
The yen’s “safe haven” status is based on the fact that Japan is a rich nation with investments from all over the world, and the Bank of Japan’s monetary policy setting as “ultra-accommodative.”
“It’s worth recalling that in March 2011, after Japan suffered a calamitous earthquake, tsunami and a nuclear meltdown at the Fukushima power plant, the Bank of Japan (BOJ) was joined by other central banks in efforts to stabilise the value of the yen. But their efforts were not directed at stopping Japan’s currency weakening but rather to temper a surge in its value as yen poured back to Japan.”
“Japanese policymakers, conscious that a stronger yen exerts both a disinflationary impulse on the price of imports and weakens the competitive position of Japan’s exporters, will hardly welcome such a firming of Japan’s currency.”
Essentially, Kimberley writes that as the trade tensions between China and the US rise, the currency market will position itself accordingly. The odds, therefore, are that Australia and Japan will be caught in the cross-fire. Both countries are in an informal alliance with the United States, known as the Quad. The Trump administration doesn’t have the best track record on how they treat their allies — but only a definite escalation in trade tensions can define how these relations progress.