Has the US crossed red line warning on Taiwan?

The Biden administration has announced its intention to walk over China’s red line warning on Taiwan. The move by the United States has been termed a reckless provocative step that dares an inevitable military response from Beijing.

If that happens then all bets are off for a full-scale military confrontation between the United States, its allies, and China.

Australia and Britain are explicitly committed to a military alliance with the United States in the Asia-Pacific through the recently formed AUKUS pact. Russia will be obliged to defend China.

The date in question is December 9-10 when the Biden administration plays host to a “Summit of Democracies”. The State Department announced a list of “participants” that include 110 countries. China and Russia are not invited, among other excluded nations.

Most provocatively, the separatist Chinese territory of Taiwan is invited to attend the video conference. The US is careful to refer to Taiwan as a “participant” not as a “nation”. Nevertheless, this semantically device aside, the invitation is a blatant violation of China’s sovereign claim of authority over Taiwan.

China’s claim to Taiwan as being a part of its integral territory is recognized by the United Nations and, at least in theory, by the United States with its One China Policy since 1979.

The island of Taiwan has existed as a self-governing territory since China’s civil war ended in 1949 with communist victory. The nationalist opponents fled to Taiwan. China retains the right to reunite Taiwan under governance from the mainland. Beijing has warned it will do so by military force if Taiwan ever declares independence.

Washington maintains a position of “strategic ambiguity” whereby it acknowledges a One China Policy while also simultaneously offering US commitments to help Taiwan with military defence.

Since Joe Biden took the White House in January, his administration has taken this ambiguity to dangerous levels. At one point, Biden has overstepped policy by explicitly stating the US would defend Taiwan in the event of a confrontation with China.

At a teleconference summit on November 16, China’s President Xi Jinping admonished US policy on Taiwan as “playing with fire”. Xi drew a red line that Washington must desist from inciting separatist ambitions of the Taiwanese government.

The announcement this week of the “Summit of Democracies” and specifically the invitation of Taiwan while excluding China is about as bold as it can get by the Biden administration in undermining China’s sovereignty and territorial integrity. That it comes only days after a verbal commitment from Biden to Xi that the US adheres to One China Policy and is not seeking Taiwan’s independence makes the provocation all the more contemptuous.

Biden’s ratcheting up of tensions with China is not out of the blue. For more than a decade, successive administrations under Obama, Trump and now Biden have been targeting Beijing as its top national security threat. Washington continually accuses China of aggression in the Asia-Pacific which is an inversion of reality. Taiwan has become a spearhead for Washington to antagonize China with. Under this administration, arms sales to Taiwan have increased as well as US naval and air force maneuvers in the Taiwan Strait under the cynical pretext of “freedom of navigation operations”.

President Biden has made “democracy versus authoritarianism” a theme of his White House. Calling a summit of 110 participating countries for the summit on December 9-10 is an arrogant attempt to demarcate the world into a false dichotomy whereby presumed virtuous nations are under the benign leadership of the United States.

China has slammed the summit as an artificial polarization of nations into so-called allies and enemies in what is a throwback to the Cold War decades. Chinese Foreign Minister Wang Yi said this divisive manipulation of international relations is simply a ploy by the United States to exert its hegemonic ambitions.

China says it is not up to the United States to define what democracy is and what is not. Beijing asserts that “democracy belongs to all humanity”. It’s not just about holding cycles of elections. In the case of the United States, its “democracy” is dominated by two parties bankrolled by Wall Street capitalists and plutocrats. Its record on poverty, inequality, racism and warmongering is plentiful to roundly negate pretentious claims of “democracy”.

In any case, back in August when the Biden administration first announced its plans for a “democracy summit” Beijing warned Washington not to use the forum to incite Taiwanese tensions. If the US persisted, China said it would order military planes and warships to Taiwan.

There is an unmistakable sense that China has had it with US provocations. The mainland has been making military preparations for a showdown over Taiwan. This insane move by Washington to call a “summit of democracies” – how bitterly ironic – could well be the final act of American treachery. War is on the cards and we just got a date.

Oil prices take a nose dive

Oil prices experienced one of their worst trading days in recent memory on Friday, plunging across the board by more than 10% on fears that a new COVID-19 variant discovered in Southern Africa might dampen economic growth and trigger another demand slump.

Following the spectacular failure of the SPR release, which instead of depressing prices ratcheted them up higher, renewed COVID-19 concerns have now brought about President Biden’s objective.

OPEC+ might still have a say in this, with the group's December 02 meeting, potentially resulting in a reduction in production targets for 2022. 

Despite repeated talks with the US government, China has pushed back against President Biden’s calls to “do more” and stated it would coordinate its own releases of strategic stocks according to its needs, cooling down the enthusiasm of market bears.

OPEC expects a release of oil stocks by majors consumers to significantly increase a global glut in the next few months, an OPEC source said, just over a week before a meeting to decide immediate output policy.

The outlook might complicate decision-making for the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+, although several sources said there has been no discussion yet on pausing planned production increases.

OPEC's Economic Commission Board (ECB), a panel of experts that advises ministers, met this week ahead of the OPEC+ ministerial meeting on December 02. The ECB expects the oil release to swell a surplus in the oil market by 1.1 million barrels per day (bpd). OPEC has warned in recent days of the expected supply excess in remaining days of 2021.

It expects a 400,000 bpd surplus in December 2021, expanding to 2.3 million bpd in January 2022 and 3.7 million bpd in February if consumer nations go ahead with the release, the source said.

On Tuesday, US President Joe Biden's administration said it would release 50 million barrels of oil from strategic reserves in coordination with smaller releases from Britain, China, India, South Korea and Japan, to try to cool prices after OPEC+ ignored calls to pump more.

Biden was frustrated after OPEC+ shrugged off his repeated requests to pump more oil. Retail US gasoline prices are up more than 60% in the last year, the fastest rate of increase since 2000.

Goldman Sachs estimated the total size of the release at 70 million or 80 million barrels, less than one day's worth of global consumption, describing it as a "a drop in the ocean".

OPEC+ has been increasing output targets by 400,000 bpd every month since August, saying those volumes were sufficient because of the expected oil market surplus next year.

Some market analysts, including JP Morgan, have suggested OPEC could slow down output increases after the release of stocks by major consumers.

OPEC+ has not yet started any discussions on a planned output hike in January 2022 and Iraq's oil minister said on Thursday OPEC+ should stick to its existing plan.

Israel does not approve JCPOA negotiations

With nuclear negotiations in Vienna set to start on Monday of next week, the conflict between Israel and the United States over Iran policy almost seemed to overtake the conflict between Jerusalem and Tehran.

Prime Minister Naftali Bennett is extremely concerned that Washington is rushing toward a nuclear deal weaker than the 2015 JCPOA Iran deal, and made his most direct military-sounding threats yet this week.

Israeli-US exchanges on the issue could get a lot worse before they get better, at a time when predictions for the nuclear talks in Israel tend to range from Iran will not agree to anything to US will cave in for a bad deal.

The latest fireworks come after four evolving stages of ups and downs of how Israelis have viewed the Biden administration’s Iran policy over the last 10 months. The current stage seems to have returned to the original deeply worried stance of November 2020, and with Iran itself at a more dangerous point.

When US President Joe Biden was elected and in his early months, top Israeli officials in the administration of Benjamin Netanyahu ranged between resignation and dread that the US would rejoin the JCPOA 2015 Iran nuclear deal with no conditions.

For Israeli officials at that time, this would have erased all of the sanctions and psychological leverage they had built up over Iran over two-and-a-half years. This without receiving anything, will pave the way for the Islamic Republic to a nuclear weapon when the JCPOA would expire, if not before.  

Despite demands and threats from Iran that Biden must return to the JCPOA on its terms by January or February 2022, the Biden team took its time and said it would cut a deal only along with an add-on deal afterward that would strengthen and lengthen the JCPOA.

Among some other issues, this goal of Washington is one of the reasons that the April-June negotiations fell short of an agreement, even if they got close. One could call this period the first Israeli win in that the US stuck to its positions.

However, then there was a third stage of confusion in which there were no negotiations from June until now, where Israel was increasingly disturbed by the Islamic Republic’s escalating nuclear violations.

But on the positive side for Israel, US started to talk about a plan B with Iran. The US seemed to judge that diplomacy was failing and that the new administration of Iranian President Ebrahim Raisi simply was unwilling to reach anything resembling a reasonable deal.

Although there was uncertainty surrounding how close the Islamic Republic was progressing toward a nuclear weapon, this period was possibly the best for Israeli-US relations because both administrations were equally frustrated with Raisi’s stonewalling.

However, once the IAEA Board of Governors seemed ready to publicly condemn Tehran in September, which could have even led to a UN Security Council referral, Raisi finally signaled a readiness to return to talks.

Even a whiff of a return to talks shut down the expected September IAEA condemnation and brought Washington into engaging in rapid diplomacy.

Despite IAEA Director-General Rafael Grossi’s framing of negotiations with Iran as intractable so far (and the IAEA tried to bend over backward to be diplomatic), all signs were that the board of governors would put the issue again during its meetings this week. Off the record, US officials also started floating new flexibility toward the Iranians.

It is unclear whether the new flexibility means allowing Tehran to maintain all of its new army of advanced centrifuges for enriching uranium, or whether it means a “less for less” deal in which the US would partially lift sanctions for even a partial reduction in Iranian nuclear violations.

Raisi had already achieved more than his predecessor, Hassan Rouhani, simply by refusing to talk for a few months. This is clear from the fact that the old “less for less” deal floated in 2019 required the Islamic Republic to start returning to the nuclear deal – not just to freeze new violations.

If the 2019 “less for less” deal meant partial sanctions relief would come for Iran shipping out some of its new large uranium stock and freezing all new enrichment, the updated, worse “less for less” deal sounds like mere freezing or slowing of new enrichment – without shipping out any of the uranium stock.

If, in 2019-20, advanced centrifuges would need to be destroyed (and there were fewer of them anyway), now they could just be placed in storage. Placing them in storage would mean they could easily be returned to operation in a matter of days or weeks.

If the Biden administration is ready for a weaker JCPOA or a weaker “less for less” deal or any negotiations that seem to reduce the sense of crisis, even without a deal – then its original idea of improving the JCPOA would seem to be out the window.

Some top Israeli defense figures, including Defense Minister Benny Gantz, have been promoting Israel working quietly behind the scenes to get a better JCPOA, even if it does not get everything it wants – for example, greater limits either on Iran’s ballistic missiles (there are currently none with any teeth) or on its aggression in the region.

But if Washington is not equipped or committed sufficiently to achieve these improvements, then what exactly can Israel hope to get from the US?

Could it be as narrow as what circumstances Biden would green-light an Israeli preemptive strike on Iranian nuclear facilities, even if he will not order a strike on his own?

US Secretary of Defense Lloyd Austin and US CENTCOM head General Kenneth McKenzie Jr. this week both emphasized that the US military option is on the table.

Yet, because of Biden’s passivity in using military force to date and his botched pullout from Afghanistan (Trump also intended to pull out, but his assassination of IRGC Quds Force chief Qasem Soleimani intimidated the Ayatollahs more than Biden has to date), many view this as empty talk with no details.

For example, during the Obama administration, US military officials gave public interviews about the readiness to use specific aircraft and weapons – and none have done that yet this round.

Possible reluctance on Biden’s part to use force raises the old question, dating back around a decade, of whether Israel has the capability to take out Iran’s deep underground Fordow facility.

There are additional, more recent questions about whether Israel could take out enough of Iran’s multiple nuclear facilities (unlike the cases of Iraq and Syria, where each had only one major facility) on its own to sufficiently set back the program.

Interestingly enough, there was a wide disparity of answers on this question by former top Israeli officials. Former IDF intelligence chief Amos Yadlin said Israel definitely could.

Former Mossad chief Tamir Pardo and former Mossad Iran desk chief Sima Shine both said they doubted that Israel could on its own.

Pardo’s successor at the Mossad, who just retired in June, Yossi Cohen, told the Jerusalem Post Conference last month and a Haaretz conference this month that Israel should make sure to have or develop such a capability – leaving his position unclear.

Similarly, former National Security Council chief Yaakov Amidror emphasized that Israel needs to have such a capability, but was vague about whether Israel could do so now.

Former IDF chief (2015-19) Gadi Eisenkot previously confidently told The Jerusalem Post that Israel could take out Iran’s nuclear program, without specifying how.

Whether the “yes” officials are bluffing to deter Iran or the “no” officials are misinformed or are downplaying Israeli capabilities to deter Jerusalem from rushing to pull the trigger, Bennett, even after this week’s speech, has not made it clear at what point he would strike.

With all of Netanyahu’s tough rhetoric, even he was intimidated from striking Iran for several years when the JCPOA was being negotiated or was operating.

Would Bennett really strike the Islamic Republic if there was a new version of the JCPOA operating, holes and all, but with the US back in the deal?

Would he aggressively use the Mossad to sabotage nuclear facilities and slow down the Islamic Republic as Netanyahu did, even if the delays from such hits might be measured only in months and not in years?

There is one factor that is much worse now than in the 2012-15 period, a factor that led Iran to make at least some big short-term nuclear concessions for the JCPOA.

Then, China and Russia wanted the Ayatollahs to make concessions and make the crisis go away.

But now China and Russia are both at new low points with the US, and short of Biden offering some game changer on Taiwan or Ukraine, he may have little to offer them to get them to press Tehran to cut a more reasonable deal.

In short, Israel is entering a period where the overall trends for changing Iranian behavior are worse. It may need to live with an extended period of uncertainty, as the US and Iran start a new game of chicken, which some think could run deep into 2022.

USD going up, up and away

Exchange rates most often impinge on the economic world when there’s big drama — China’s surprise devaluation in 2015, the crisis of confidence with EUR in 2000, the Asian currency collapses of 1997. There’s a sleeper hit developing right now with the dollar.

The Bloomberg Dollar Index, which measures the greenback against a basket of other major currencies, is heading for its biggest monthly gain since March 2020 — when global markets were in turmoil over the eruption of the pandemic and there was massive emergency demand for dollars.

On the flipside, the currencies of countries including Chile, Poland, South Africa and Turkey have tumbled in double-digit percent terms over the past six months.

USD is appreciating as investors start building in a more aggressive withdrawal of Federal Reserve monetary stimulus. San Francisco Fed President Mary Daly said on Wednesday that she’d support a faster taper if data stay strong. Some Wall Street banks raised forecasts for economic growth in the fourth quarter after a wave of robust data was released.

A rising USD would have significant consequences in particular for emerging markets, which still rely to a large extent on it for their borrowing needs. The stronger the currency is, the more expensive it is for companies and governments in developing nations to make payments on debt denominated in greenbacks.

Even as the American share of the global economy has declined over the years, the role of the dollar has in many ways strengthened — increasing the consequences of its appreciation. A Bank for International Settlements report in September showed that outstanding dollar credit to companies and other non-bank borrowers outside the US more than doubled since the financial crisis in 2008 to US$13 trillion by the end of March.

A host of emerging and developing central banks — from Chile to Russia to Pakistan — have already started increasing interest rates well ahead of counterparts in the developed world, and the prospect of their currencies weakening against the USD will only add to the pressure to extend or even strengthen those campaigns.

As the Fed moves to curtail the supply of USD, by winding down its quantitative easing program and turning at some point toward raising interest rates, conditions will only get tougher for emerging-nation borrowers. That will add further headwinds for economies struggling to match the rich nations in combating the pandemic.

“The peak in terms of the flow of liquidity’’ in USD “is behind us,” Shweta Sing, a managing director at research firm TS Lombard, wrote in a report. The big build-up in the Fed’s balance sheet since early 2020 has “meaningfully mitigated the ripple effects from a strong USD to global financing conditions,” she said. “But the risks are building up.”

Will Joe Biden succeed in reining in oil prices?

The United States is pulling out various stops in an effort to get gas prices under control at the start of a busy holiday travel season. The administration is tapping into the strategic petroleum reserve and President Biden has called on the Federal Trade Commission to investigate whether oil companies are responsible for increased prices.

But the focus on gas prices has provided fuel for Republican attacks on Biden’s handling of the economy, and his energy policies in particular, at a time when the White House is hoping to rally support for ambitious climate goals in its roughly US$2 trillion spending plan.

There was a prediction that 53.4 million people will travel for the Thanksgiving holiday, a 13% increase from 2020 when many Americans opted not to travel with coronavirus cases and deaths surging around the country.

The busy travel season to come has put a spotlight on gas prices in particular amid broader concerns about inflation, something the White House has attempted to show it has under control.

“Obviously, the president does not control the price of gasoline -- no president does,” Energy Secretary Jennifer Granholm told reporters. “But what we’re seeing right now is this global mismatch between supply and demand. Oil production is lagging behind as the rest of the economy roars back to life after the shutdown.”

“So, we, in this administration, are leaving no stone unturned as we examine the market to figure out what's behind the high prices,” she said.

The White House has shown more urgency in recent weeks in publicly messaging how it is trying to provide relief for Americans grappling with inflation, particularly after the Labor Department released statistics showing consumer prices grew far faster than expected in October and that annual inflation had hit a 30-year high. That rise was in part a result of rising energy costs, and increased costs at the gas pump.

Biden last week wrote to the Federal Trade Commission requesting the agency look into whether oil companies were unfairly spiking prices at the pump.

And on Tuesday, the administration announced it would release 50 million barrels of oil from the nation’s Strategic Petroleum Reserve in coordination with several other countries in an effort to match supply with demand.

Experts have questioned whether either move will do much to meaningfully bring down prices immediately, and they cautioned other factors, like the course of the pandemic, are more likely to affect the trajectory in the months to come.

That has led some conservatives to question whether the White House’s actions on gas prices were more of a political maneuver as poll after poll has shown voters souring on Biden, particularly over his handling of the economy, with his approval ratings dropping into the low 40s.

“This is being done in order to use every tool at the president's disposal to lower the price of gas for the American people,” White House press secretary Jen Psaki said when asked if tapping into the strategic reserve was being done for political purposes.

Republicans have gone on offense over inflation for the last few weeks, and the Biden administration’s decision to release oil from the strategic reserve provided more fodder for attacks on its energy policies.

Former President Donald Trump and GOP lawmakers argued the Biden administration’s desire to shift away from fossil fuels and toward clean energy industries has led to problems at the pump.

“Today’s announcement is nothing more than a gesture. If the president and his administration wanted to make a real, long-term impact, they would work to maximize domestic production and expedite energy infrastructure like pipelines—not close federal lands to drilling and add a federal tax to methane,” Sen. Shelley Moore Capito, ranking member on the Senate Environment and Public Works Committee, said in a statement.

Sen. John Barrasso, the top Republican on the Senate Energy and Natural Resources Committee, accused Democrats of “waging a war on American energy.

Even Sen. Joe Manchin, who has opposed some climate initiatives in Biden’s Build Back Better agenda, called the release of oil from the reserves an “important policy Band-Aid for rising gas prices” while criticizing the administration's energy policy as “shortsighted.”

Biden in remarks Tuesday sought to assure the public that the US economy was on the upswing and a rise in prices would not be a long-term concern.

“I also want to briefly address one myth about inflated gas prices: They are not due to environmental measures. My effort to combat climate change is not raising the price of gas or increasing its availability,” Biden said in prepared remarks, arguing investments in electric vehicles, solar panels and other sectors would spur job creation and innovation.

“Let’s beat climate change with more extensive innovation and opportunities,” he added. “We can make our economy and consumers less vulnerable to these sorts of price spikes when we do that.”

Israel airstrikes Syria, once again

At least four people were killed and seven injured in an alleged Israeli airstrike that reportedly targeted sites belonging to Hezbollah in Homs in western Syria, according to Syrian media and reports.

According to SANA, the airstrikes were carried out from northeastern Beirut. The report claimed that most of the missiles were shot down by Syrian air defenses. Two civilians were killed and another was injured in the strikes.

A Syrian anti-aircraft missile launched at what was allegedly an Israeli aircraft crashed into the Mediterranean Sea, but preliminary estimates say it went over Lebanon and did not cross into Israeli airspace, according to reports.

According to the opposition-affiliated Halab Today TV, about 10 members of Hezbollah were injured after a site the movement uses as a military headquarters and to store logistical equipment was targeted in the airstrikes.

According to Al-Araby Al-Jadeed, at least 10 missiles hit positions belonging to Syrian regime forces west of the city of Homs, causing casualties among civilians, Syrian soldiers and Iran-backed militants. One of the sites targeted was located in the Syrian Gas Company, according to the report.

The two civilians were reportedly killed by a missile that hit a civilian area near a gas station west of Homs.

The airstrikes come exactly a week after the IDF fired two missiles from the Golan Heights toward an empty building south of Damascus.

One of the missiles was shot down and no losses were caused, according to the report. It is unclear whether the missiles were fired from an aircraft or were surface-to-surface ones.

A week before that strike, two Syrian soldiers were injured and material damage was caused in an alleged Israeli airstrike targeting sites in the Homs area.

Over the past year, while Israeli strikes have intensified in Syria, the response time by Syrian air defense batteries has become quicker, leading the Israel Air Force to change how it acts during such operations – including by having larger formations so that more targets can be struck at once during an operation instead of having jets return to the same target.

Iran has begun deploying advanced anti-aircraft missile batteries to the region in an attempt to challenge Israeli jets.

US getting ready to confront with Russia

The Biden administration is considering sending military advisers and new weapons to Ukraine in the face of a Russian military buildup near the border between the two countries, CNN reported Tuesday.

The proposed lethal aid package could include mortars, air defense systems such as stinger missiles and new Javelin anti-tank and anti-armor missiles, multiple sources familiar with the deliberations told the outlet.

Sources also said the Pentagon has pressed for some equipment that would have gone to Afghanistan to instead be sent to Ukraine, like Russian-made Mi-17 helicopters. The US military has halted sending such equipment to Afghanistan with the end of its mission there in August.

US officials have also talked with European allies about forming a new sanctions package that could go into effect should Russia invade Ukraine, the sources said. 

The discussions are taking place as Ukraine has begun to warn the US and allies that a Russian invasion could happen as soon as January. 

Kyiv earlier this month noted the unusual Russian troop movements, but after discussions between US and Ukrainian officials — and an estimated 92,000 Russian troops now placed close to the border — the warnings have grown. 

US and NATO intelligence now fear Moscow’s troop buildup is preparation for a military operation over Ukraine’s eastern border from multiple locations, much like when Russia invaded Crimea in 2014. 

“Our concern is that Russia may make the serious mistake of attempting to rehash what it undertook back in 2014, when it amassed forces along the border, crossed into sovereign Ukrainian territory and did so claiming — falsely — that it was provoked,” Secretary of State Antony Blinken said last week.

Asked about the possible military package, a State Department spokesperson told The Hill that they had nothing to preview or confirm. 

They did note, however, that the administration has “demonstrated that the United States is willing to use a number of tools to address harmful Russian actions and we will not hesitate from making use of those and other tools in the future.”

"We continue to have serious concerns about Russian military activities and harsh rhetoric towards Ukraine, and call on Moscow to de-escalate tensions," they added.

Russian officials, meanwhile, have maintained that the troops and military units are in the area as part of exercises and a response to threats from NATO. They also have called reports that they may soon invade Ukraine “false.”

Asked on Tuesday about the possibility that the US will send additional assistance to Ukraine, Russia spokesman Dmitry Peskov on Tuesday suggested that should it happen, it could lead “to a further aggravation of the situation on the border line.”