After Afghanistan, China and Russia will test Biden

The US administration may have to handle crises over Taiwan and Ukraine at the same time

Gideon Rachman

“America is back” proclaimed Joe Biden, a few weeks ago.   

But in Afghanistan, America is out. 

The US president has just announced the withdrawal of all remaining American troops from the country. A 20-year war will end on the symbolic date of 9/11, 2021.

The watching world will wonder if a gap is emerging between White House rhetoric about re-engagement with the world, and a reality of continuing retreat. 

Biden insists that this is not the case. 

He argues that America has achieved its counter-terrorism aims in Afghanistan and now intends to “fight the battles for the next 20 years, not the last 20”.

But perception matters. 

The danger is that the pullout from Afghanistan will be seen outside America as a Vietnam-like failure that could eventually lead to the fall of Kabul to the Taliban, a replay of the fall of Saigon to North Vietnam in 1975.

Rival powers, in particular Russia and China, could now be emboldened to test the Biden administration’s resolve a little further. 

The obvious flashpoints are Ukraine and Taiwan. 

In recent weeks, the Kremlin has assembled more troops on its border with Ukraine than at any time since 2014 when Russia grabbed Crimea. 

Last week, China sent a record number of military jets into Taiwan’s air defence identification zone. 

Both countries are combining military muscle-flexing with warlike rhetoric.

Biden himself has used confrontational language with Russia and China. 

He has called Vladimir Putin, Russia’s president, a killer and his administration has branded China’s actions in Xinjiang a genocide. 

The US also recently imposed sanctions on Russian and Chinese officials and has eased restrictions on American officials meeting their Taiwanese counterparts.

The strategic situation in Asia and Europe is similar in one key respect. 

The US has expressed strong support for both Taiwan and Ukraine, but neither country enjoys an explicit American security guarantee. 

The US relies on a policy of “strategic ambiguity” over Taiwan. 

The idea is that China should understand there is a strong chance that the US would fight to defend Taiwan, without a firm promise being made. 

In a similar way, the US has never spelt out what it would do if Russia launched a full-scale invasion of Ukraine.

Although Taiwan and Ukraine are separated by thousands of miles and involve different antagonists, the two stand-offs feel connected. 

Ivo Daalder, a former US ambassador to Nato, believes that: “Moscow and Beijing will look closely at how we react in one situation to set the stage for the other.” 

Daalder argues that “we need greater strategic clarity on what we would do if Russia moved militarily against Ukraine, or China on Taiwan”.

There are voices in the US calling for America to now make an explicit security guarantee to Taiwan, and for Nato to accelerate the process that would allow Ukraine to join its alliance. 

The hope is that these moves would deter Moscow and Beijing, and so reduce the risk of war starting by miscalculation. 

The argument against these policy changes is that China and Russia may interpret them as a threatening shift in the status quo — and feel compelled to respond. 

American allies in Asia and Europe may also feel that explicit security guarantees for Taiwan and Ukraine are too provocative. 

The joint statement issued by Biden and Yoshihide Suga, the Japanese prime minister, after a meeting last week, stressed the importance of peace in the Taiwan Strait, but remained vague about how Washington and Tokyo might respond if conflict broke out.

It would obviously be particularly difficult for the Biden administration to respond to simultaneous crises over Taiwan and Ukraine. 

Some western strategists are concerned that Moscow and Beijing may be co-ordinating their actions, to maximise the pressure on the Biden administration. 

They point to an increase in the frequency of high-level meetings between the Russian and Chinese governments. 

Beijing and Moscow also made statements, after a recent meeting between their foreign ministers, which signalled a deepening of their strategic relationship and a more open rejection of a western-led world order.

The internal situations in Russia and China may also be raising the dangers of conflict. 

Putin recently imprisoned Alexei Navalny, the most popular and dangerous opposition leader he has ever faced. 

Navalny is on hunger strike and may soon die, sparking further protests. 

The Kremlin knows that conflict over Ukraine boosted Putin’s popularity back in 2014. Another small war may look like a tempting option.

As the Chinese Communist party prepares to celebrate the centenary of its foundation later this year, President Xi Jinping may be looking for a triumph over Taiwan. 

American officials believe that Xi and his advisers have convinced themselves that the US is in deep and terminal decline. 

They fear that the Chinese leadership may believe the US would ultimately back down rather than fight over Taiwan.

But even the most confident and nationalistic officials in Beijing and Moscow will still be conscious of the risks of head-on confrontation over Taiwan and Ukraine. 

The likelihood is that Russia and China will continue to use “grey zone” tactics that stop just short of all-out conflict. 

As America discovered in Afghanistan, it is much easier to start a war than to control its outcome.

Markets weigh prospect of new commodities supercycle

Prices from corn to copper are rallying as economies reopen but sceptics think it will be transient

Neil Hume and Emiko Terazono

The most recent price boom took place during China’s rapid industrialisation starting in the late 1990s © FT montage; Dreamstime; Bloomberg

It’s been a decade since the last commodity market boom, triggered by China’s emergence as a global economic powerhouse, finally ran out of steam.

But a wide-ranging rally that has propelled the price of key raw materials including copper, lumber and iron ore to all-time highs and also boosted agricultural commodities is fuelling expectations that a new commodities “supercycle” has arrived.

But what is a commodity price supercycle and what makes it different from short term boom and bust business cycles?

What is a supercycle?

While there is no agreed definition of a supercycle, it has been commonly used to describe a period where commodity prices rise above their long-term trend for between 10 to 35 years.

The upswing is followed by a downturn of similar duration as supply eventually catches with demand. 

The result is a full cycle that can last anything from 20 to 70 years.

According to Capital Economics, commodity price supercycles are typically triggered by “some sort of structural boost to demand” that is large enough to “move the needle at a global level” — and to which supply is slow to respond.

In natural resources, there is often a lag between supply and demand because it can take up take 10 years or more to build a big mine or develop a large oilfield.

How many super cycles have there been?

Economists have identified four sustained periods of above-trend commodity prices. 

The first coincided with the emergence of the US as an economic powerhouse in the 1880s.

Another accompanied the rearmament drive of the 1930s and continued into the reconstruction period after the second world war.

The third supercycle was during the oil price shocks of the 1970s, which indirectly boosted the prices of other commodities by increasing production costs.

The most recent price boom took place during China’s rapid industrialisation starting in the late 1990s. 

This period also saw sharp rises in the prices of agricultural commodities that triggered the 2007-08 food crisis.

What did China’s supercycle look like?

The speed and scale of China’s urbanisation in the early 2000s caught the natural resources industry by surprise. 

Big oil producers and miners struggled to meet China’s seemingly insatiable appetite for raw materials as its entered a phase of dizzying economic growth fuelled by huge spending on infrastructure and the creation of new cities.

As a result copper, which had languished below $2,000 a tonne for most of the 1990s, hit a record high above $10,000, while oil went on to hit $140 a barrel. 

When supply finally caught up with demand in 2011 and a tsunami of new production finally came online, commodity markets entered a deep funk from which they are only just emerging.

Has another supercycle arrived?

For commodity bulls like Goldman Sachs, the answer is a resounding yes. 

They argue the coronavirus pandemic has ushered in a new era of commodity-intensive growth, as governments put greater emphasis on job creation and environmental sustainability rather than the focus on financial stability that followed the 2009 global financial crisis.

They point to President Joe Biden’s $2.3tn American Jobs Plan and Europe’s Green New Deal as evidence, both of which will pump huge amounts of investment into commodity-intensive infrastructure and projects aimed at meeting the goals of the Paris agreement on climate change.

At the same time, commodity bulls highlight how years of low prices have prompted producers to curb spending on new projects and expansion, crimping supply. 

“I believe we are in for a supercycle.

We don’t have many shovel-ready projects,” said Ivan Glasenberg, chief executive of Glencore, one of the world’s biggest miners and commodity traders, at a recent FT summit, referring to copper.

This is not only true of the mining industry, where investment has been slashed after a brutal market downturn in 2014, but also oil, where many companies are looking to transition away from fossil fuels to renewable energy. 

Some Wall Street banks argue that oil demand will continue to outstrip supply growth in the coming years, potentially creating one last price surge before electric vehicles cause consumption to peak.

In agriculture, Chinese demand and biofuels are boosting the price of grains and oil seeds. 

China’s corn demand looks to be on a new trajectory as it looks for imports to feed its livestock. 

At the same time the focus on renewable energy in several countries is putting the spotlight on biofuels produced from agricultural sources.

Are there reasons to be sceptical?

Yes. 

For many economists the sizzling performance of commodities from the Covid lows of 2020 is just a cyclical upswing driven by the huge fiscal and monetary response to the pandemic.

They say it lacks the compelling structural demand story that drove previous supercycles and that the global green energy transformation will not emerge quickly enough to offset the impact of slowing Chinese growth, where pandemic-era stimulus is already being withdrawn.

To the extent there is a broad commodities rally, the sceptics reckon it will be focused on a small group industrial metals such as copper, cobalt and nickel, which are key to energy transition and where new projects are in short supply.

Uruguay in the Spotlight

It’s not every day that this small nation gets drawn into the geopolitical fray, but here we are.

By: Allison Fedirka

After a comparatively hands-off approach to Latin America after the Cold War, the United States is in the process of reengaging with the region. 

What that engagement looks like depends on geostrategic locations, especially in the South Atlantic, and especially with countries that have already made gestures to suggest an opening for improved ties. 

No other country than Uruguay fits the bill.

Their new courtship started earlier this month. 

On April 6, the head of U.S. Southern Command paid a two-day visit to Uruguay – the first of its kind in five years. 

A week later, the U.S. National Security Council’s senior director for the Western Hemisphere, Juan Gonzalez, and the Department of State’s acting assistant secretary for Western Hemisphere affairs, Julie Chung, did the same. 

They met with the president, the foreign minister, the interior minister, the defense minister and the head of the Secretariat of Strategic State Intelligence. 

Gonzalez said the two sides agreed to plan a new meeting in Washington at an unspecified date, suggesting the U.S., which has no shortage of problems and challenges, is interested in making the time for tiny Uruguay.

Its value to the US. lies in its geography. 

Uruguay covers only about 68,000 square miles and has a population of just 3.5 million people, who reside mostly in the capital of Montevideo and along the Rio de la Plata coastline. 

The country is flat and full of fertile soil but, unlike many of its neighbors, lacks the mineral deposits so many other countries lust after. (This helps explain why Europeans originally declined to settle there.) 

What Uruguay brings to the table is not what is inside the country’s borders but the borders themselves. 

The Uruguay River empties into the Rio de la Plata at nearly the same point as the Paraguay River, giving its inland territories access to the Atlantic Ocean. 

In total, Uruguay’s coastline measures 410 miles and its continental shelf 350 nautical miles. 

This gives a small country, nestled between regional giants Brazil and Argentina, an outsized reach into the South Atlantic. 

Uruguay’s position as a buffer state between those two giants makes it attractive to outside powers looking for a partner. 

Since the arrival of Europeans in the early 1500s, Uruguay has passed back and forth between Spanish and Portuguese hands several times. 

The country’s flat land and lack of any natural barriers made fighting easy but made establishing clear lines of defense extremely difficult. 

Even after Argentina and Brazil became independent, fighting for control over Uruguay lasted until Lord John Ponsonby had the idea to create a state and end the fighting. 

To this day, much of Uruguay’s foreign strategy is based off that balancing act between its two stronger neighbors. 

Outside powers often take advantage of this situation. 

Third-party interest in Uruguay goes back to the country’s foundation. 

Fighting between Argentina and Brazil came to a close thanks to mediation by the United Kingdom. 

The U.K. was seen as an acceptable mediator because it had supported the independence movements in South America and opposed the former colonial powers of Spain and Portugal. 

A newly independent state helped establish peace in a region with which the U.K. could increase trade and to which it could sell goods. 

The creation of Uruguay meant the U.K. could access Montevideo, a major commercial hub along South America’s Atlantic Coast, without having to directly engage with the more powerful Argentine and Brazilian governments. 

Uruguay still serves as an alternative entryway into South America that sidesteps Argentina and Brazil. 

This position can be useful to an outsider seeking to secure its presence in the region.

As the U.S. tries to shore up influence in the Western Hemisphere in the face of competition from other powers, it will need to address the South Atlantic. 

Washington faces some logistical challenges for monitoring and policing South Atlantic waters due to its sheer size and distance. 

Having a reliable partner in the region would help immensely by essentially expanding the reach of U.S. operations.

Uruguay’s location and stability are perfect in that regard. 

Brazil’s size makes it hard for bilateral agendas and priorities to align, not to mention that Brazil’s political crises make it difficult to build on any strategic partnerships at this time. 

Argentina is fraught with economic uncertainty and social unrest, and is increasingly flirtatious with China. 

But Uruguay has plenty going for it. 

The country is one of the most politically and economically stable countries in South America. 

But it’s not so well off that it wouldn’t want to benefit from more U.S. engagement, particularly given the economic problems facing its major trade partners Brazil and Argentina.

On the security front, the concept of U.S.-Uruguayan cooperation is not new. 

As the U.S. started to become a power at the beginning of the 20th century, it started to use its Navy to lay claim to the Western Hemisphere and discourage European interference. 

However, the Navy was also used to help regulate conflicts among Latin American countries. 

In 1904, for example, Uruguay’s president asked the U.S. to send warships to dissuade Argentina from moving against the sitting government. 

In 1940, the U.S. floated the idea of establishing a military base in Laguna del Sauce. 

Strong opposition in Uruguay, which feared Brazilian and Argentine responses to a U.S. base, quickly killed the idea. 

A subsequent attempt to resurrect it in 1944 also failed. 

Instead, the U.S. ushered in the Inter-American Reciprocal Assistance Treaty, which served as a collective security pact among its signatories, including Uruguay. 

This was followed by a 1952 security agreement between Uruguay and the U.S. that still serves as the legal blueprint for current cooperation. 

Over the past decade, there have been several calls in Uruguay to modernize its defense agreements with the U.S. to better reflect the post-Cold War world. 

Now that the U.S. has shown an interest in Uruguay, the calls may only grow louder.

The indications from Washington suggest reengagement will feature support for Uruguayan-led security efforts. 

The most immediate threat the U.S. faces in the South Atlantic is Chinese involvement in infrastructure projects and the presence of Chinese fishing fleets. 

The U.S. already expressed its concern on both scores, though given its fraught history in the Cold War, it’s hard to believe the U.S. will be allowed to build bases there. 

Better, according to the SOUTHCOM commander, to keep things light, with forces able to come and go quickly with the help of partners. 

He also suggested that SOUTHCOM increase its intelligence, surveillance and reconnaissance capacity in the region and tie it to improved security cooperation with partner nations.

There may also be an added economic component. 

In a subtle nod, the White House declared a Pan American Day earlier this month. 

The name harkens back to a concept the US. formally introduced to the region in 1890 through the First International Conference of American States. (It would later evolve into the Pan-American Union and then the Organization of American States.) 

The initial purpose of this mechanism was to promote and facilitate trade within the Americas by collecting and disseminating information concerned with production, commerce and customs law. 

The overarching strategy behind it was the economic well-being of the Americas and keeping southern countries disinterested in outside powers. 

An economic component would further help curb Chinese influence in the region.

More broadly, the United States' development of closer ties to Uruguay serves as a litmus test for its reengagement with the Western Hemisphere. 

On the security front, the U.S. needs a sort of blueprint for engaging with the region beyond counter-narcotics operations and in a way that does not create a backlash against the U.S. 

The timing also opens the possibility of revisiting existing security agreements by creating an environment in which these countries can increase ever so slightly their requirements for cooperation given that, this time, Washington is approaching them and not the other way around. 

Vaccine efficacy

When covid-19 vaccines meet the new variants of the virus

A lot depends on blocking transmission, not just disease

On february 1st researchers around the world saw the tweet for which they had been waiting: “We say with caution, the magic has started”. 

Eran Segal, a scientist at the Weizmann Institute, had been posting regular updates on the course of Israel’s covid-19 epidemic since its mass vaccination campaign had begun six weeks earlier. 

By February 1st he was seeing the number of hospitalisations dropping significantly among the over-60s—a cohort in which the number vaccinated had reached 70%, seen as a crucial level, three weeks before. 

After an expected but still somewhat nail-biting lag, the vaccine was doing its thing.

By February 6th about 85% of the over-60s in Israel—and 40% of the general population—had received at least one dose of the Pfizer/BioNTech mrna vaccine (or in a few cases the Moderna mrna vaccine) and 75% of the over-60s had received their second dose, too. 

In that age group hospital admissions for covid-19 were about two-thirds what they had been at their peak in January and still falling (see chart 1). 

At the same time, the country as a whole was seeing its caseload rise.

The vaccine was not the only thing which arrived in Israel late last year. 

So did b.1.1.7, a highly contagious variant of sars-cov-2, the virus responsible for covid-19, which was first identified in Britain in September. 

It set about filling up hospital wards in Israel just as it has done in Britain, Ireland and Portugal. 

Despite an extended lockdown it is still doing so.

It is no surprise that sars-cov-2 has evolved new biological tricks over a year spent infecting more than 100m people. 

But the near simultaneous arrival of not just b.1.1.7 but also b.1.351, which is now the dominant strain in South Africa, and p.1, a variant first seen in Brazil, is making the roll-out of mass vaccination more complicated and more confusing than might have been hoped when the first evidence of safe, effective vaccines became available last November. 

How fast the various new variants can spread, how well today’s vaccines work against them and how soon new vaccines better attuned to them—and to the other variants which will turn up over time—become available will determine the course of the pandemic.

Testing the bounds

As of February 10th at least nine vaccines had been authorised for use in one or more countries. 

The Pfizer/BioNTech vaccine, first out of the gate, has now been authorised for use in 61, as well as for emergency use by the who. 

The number of doses administered, 148m, now exceeds the number of confirmed covid-19 cases recorded over the entire course of the pandemic. 

All of the vaccines appear very good at preventing severe cases of covid-19 of the sort that lead to hospitalisation and/or death; in trials which compared the vaccinated with control groups the efficacy with which the various vaccines prevented these outcomes was 85-100%.

Their efficacy against all symptomatic cases of the disease found in trials has been lower, ranging between 66% and 95%. 

Some of that range is down to intrinsic differences between the vaccines. 

Some is down to trials being done according to different protocols and in different populations, sometimes against different variants of the virus. 

It is hard to disentangle such effects. 

The general message, though, is fairly clear. 

The vaccines make serious cases of all sorts very rare, and mild-to-moderate cases caused by the original strain of the virus a lot rarer than they would be otherwise.

That is undoubtedly good news; it lessens the death toll, the suffering and the strain on hospitals. 

But the situation is not perfect. 

For one thing mild and moderate cases can be worse than they sound. 

Many cases of “long covid”, a debilitating form of the disease in which some effects last for months, follow original infections that were not severe enough to require hospital admission. 

It is not yet clear whether long covid is less likely in people who have been vaccinated.

What is more, this pattern of effects does not reveal what the vaccines are doing about transmission. 

As Natalie Dean, a biostatistician at the University of Florida, points out, there are two ways one can imagine a vaccine bringing about the pattern of protection the covid-19 vaccines have been seen to provide (see chart 2). 

In one of them the same number of infections occurs as would occur otherwise, but the consequences of these infections are systematically downgraded. 

Thus almost all of the infections which would lead to severe cases lead to moderate or mild cases, and many of the infections that would have led to moderate or mild cases produce no symptoms at all.

The alternative is that the total number of infections is being reduced, but the ratio of severe to mild to asymptomatic cases stays roughly the same. 

The already low number of deaths and hospitalisations shrinks to something hardly there. 

The number of mild cases is similarly deflated (although, since bigger, remains palpable). 

And so is the number of asymptomatic cases. 

Indeed, the main difference between the two scenarios is that in one the asymptomatic cases rise, and in the other they fall.

The passing game

In the real world there is almost certainly a bit of both going on: lower infections overall and a lessening of the symptoms that follow, with different vaccines offering different profiles. 

But considering the two extremes is still instructive. 

Vaccines which do little more than downgrade the symptoms will be doing relatively little to stop the spread of the virus. 

Honey-I-shrank-the-infections vaccines, on the other hand, will be making a big dent in the epidemic’s now infamous R number—the number of new infections to which each infection gives rise. 

If you imagine reducing what are known as “non pharmaceutical interventions”—masks, social distancing, shelter at home orders and the like—that difference would begin to matter a lot.

Some people will not be vaccinated, either because of pre-existing conditions which make it dangerous for them, because there isn’t enough vaccine for everyone, or because they choose not to. 

If the vaccines are basically downgrading symptoms, then these unvaccinated people will be at risk. 

If they are making the virus less transmissible that risk will be lessened.

A covid-19 vaccine that is highly effective in preventing transmission will, therefore, be particularly useful. 

According to a model by Imperial College London, all other things being equal, a vaccine that blocks 40% of infections and thus prevents 40% of disease would have a similar impact on the number of covid-19 deaths as a vaccine that got rid of 80% of disease but left infection untouched.

Epidemiologists are waiting with bated breath for results that will tell them how good existing vaccines are at reducing asymptomatic infections and infectiousness. 

Data from Israel suggest that the viral load in swabs from infected individuals is lower if they have been vaccinated. 

Clinical trials of the Oxford/AstraZeneca vaccine suggest that the jab may halve infections as detected by pcr tests. 

Such results suggest that covid-19 vaccines are likely to reduce overall transmission of the virus. 

But understanding quite how much transmission is blocked—and the degree to which some vaccines are better at blocking transmission than others—will take months.

And then there is the further complication of the new variants. 

Vaccines seem to have no particular problem with b.1.1.7. 

It just complicates things by running through the unimmunised parts of the population that bit faster. b.1.351, which has now been found in more than 30 countries, is of greater concern. 

At least three vaccines—those from Oxford/AstraZeneca, J&J and Novavax—have been found to be less effective at stopping it from causing disease than they are against variants elsewhere. 

There is increasing evidence that P.1, now also reported in a number of countries beyond Brazil, also appears to be better at avoiding immunity created by prior infection and by some vaccines.

Countries that have already vaccinated a lot of people could be brought back to square one by the spread of such variants. 

Britain, where 13m people had been vaccinated as of February 10th, and millions more have been infected and thus have some immunity (British studies have found reinfection very rare for at least five months), is trying hard to keep b.1.351 from making inroads in the population. 

Health authorities are mass-testing neighbourhoods where cases of b.1.351 have been spotted and are doing particularly meticulous contact tracing when a case is found. Border controls have been tightened.

Eking out an advantage

Not all such new variants can be spotted and stopped at borders. 

Mutations can arise anywhere—sometimes the phone call is coming from inside the house. 

But there may be a limited range of mutations about which people need to worry. 

The new variants all differ from the original virus and from each other in various ways. 

But p.1 and b.1.351 both share a particular mutational quirk—technically called e484k but mercifully nicknamed Eric or Eek—which makes a specific change to the spike protein on the outside of the virus. 

Eek has now been found in some isolates of b.1.1.7. too. 

Researchers are beginning to think that the change Eek represents is what allows those variants to infect people even if they have been vaccinated or previously infected.

It would be great if there were no vaccine-resistant strains. 

But given that there are, the possibility that they are all using the same trick offers a bit of comfort. 

It suggests that Eek may be the best way for new variants to avoid immune responses capable of dealing with the original strain, or at least the way evolution can most easily find. 

If the variants have all converged on the same trick, tweaking vaccines to protect against one may protect against all—and against any later variants to which natural selection teaches the same ruse. 

If the virus had found a whole panoply of ways by which to avoid existing immune responses things would look a lot worse.

Whether or not Eek turns out to be crucial, new ways of broadening immunity are on their way. 

Some vaccine-makers are developing booster shots designed to help people vaccinated with earlier versions of their jabs deal with new variants. 

Others are developing vaccines intended to work for multiple sars-cov-2 variants straight away. 

On February 3rd GlaxoSmithKline and CureVac, a German biotech company with an mrna vaccine in late-stage clinical trials, added their names to those developing such “multivalent” vaccines.

Tweaked covid-19 vaccines will not be required to go through large scale clinical trials to prove their efficacy, any more than updated seasonal flu shots do; small trials that look for markers of immunity in the blood may suffice. 

Britain’s National Health Service, which should be able to vaccinate all adults who choose to be jabbed by the end of the summer, is already starting to make plans for a round of covid-19 booster shots aimed at new variants in the autumn. Increased surveillance may yet provide advance warning of which variants need to be dealt with by subsequent tweaks. 

It will take luck, diligence and hard work, but the magic that started at the beginning of this year may be made to last for many years to come.