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The Pentagon is freaking out about a potential war with China: (Because America might lose.) Politico
+ “Unfortunately, the more you dig under the hood the more problems you see,” said a senior Democratic defense expert in the Senate who was granted anonymity because he was not allowed to speak on the record for his boss.
+ “This is largely a function of the post-Cold War period being focused on efficiency. Since the Gulf War we came to expect too much from smart munitions. We haven’t needed stockpiles or found ourselves critically low on spare parts. So we’ve decreased the wiggle room.”
+ “We could throw a trillion dollars a year at the defense budget now, and we’re not going to get a meaningful increase in traditional military capabilities in the next five years.” -- Christian Brose, chief strategy officer, Anduril Industries
+ “The most important thing to remember is that China is fighting a home game in that region where the U.S. is fighting an away game, so we have to bring much more mass to bear,” says Wasser. “Attrition is baked into Chinese assumptions.”
+ “The only way we win is by radically scaling our investments in non-traditional military capabilities, such as lower-cost autonomous systems.” -- Christian Brose, chief strategy officer, Anduril Industries
Biden executive order on investments in China faces hurdles: Congress and Wall Street push back, while work with key allies remains to be done. Nikkei
+ The Biden administration's long-expected outbound screening mechanism for US investment in China continues to be delayed as the White House tries to get key allies on board while navigating domestic pushback in Congress and on Wall Street.
+ The screening mechanism, which would be put forth via executive order from President Joe Biden, would focus on investments in dual-use technologies that could have military applications, such as semiconductors, quantum computing and artificial intelligence. Biotechnology may be included as well.
+ "They don't have a template to go off of, and they have concerns from the business community," said Sarah Bauerle Danzman, an associate professor of international studies at Indiana University and a former foreign investment security case analyst with the State Department. "So those two things combined have made it really hard for them to kind of adhere to the initial schedule that they wanted."
+ "Capital is like water: if you squeeze it, it's going somewhere," said J. Philip Ludvigson, a former director for monitoring and enforcement at the Treasury Department who is now with the King and Spalding law firm.
+ In Asia, South Korea maintains an outbound investment review process, as does Taiwan, which also has special regulations for investments in mainland China. But such a screening regime would be the first of its kind in the US.
+ US investors are never going to welcome new limits to their portfolios, Ludvigson says. But with the ongoing economic sparring between the two countries, in many ways they have already been preparing for further obstacles for doing business with China.
NYT: China, its economy flagging, prods consumers to save less and spend more
China: Young people feel the crunch in tough job market: Youth unemployment in China is at a record high. Many youths now consider either "lying flat" — refusing to pursue a career — or leaving the country. DW
Reuters: Putin says tactical nuclear weapons to be deployed in Belarus in July
Shadow men: Inside Wagner, Russia’s secret war company: The Wagner Group began as a small clandestine force but has grown into a global war cartel run by Yevgeny Prigozhin, plundering gold and diamonds while advancing the Kremlin’s interests and becoming the face of the Russian assault in Ukraine. WSJ (Video)
+ This Wall Street Journal documentary traces Wagner's evolution from a small, guns-for-hire operation into a sprawling network of businesses that has been active on four continents.
Norway and Russia face off in the Far North: Russian trawlers appear to be angling for more than fish, sailors are taking an interest in bridges, and spies are being uncovered: In the far north of Europe, the Kremlin appears to be increasing its activity, and Norway is paying close attention. Der Spiegel
Bloomberg: Pentagon readies new $2 billion Ukraine air defense package
+ Raytheon, Lockheed Martin missile systems will be included
+ US aid program designed for Ukraine’s long-term defense needs
Europe at risk of losing the lithium race: Without lithium, copper, and rare earths, our mobile phones, electric cars, and wind turbines wouldn't function. Currently, we are almost exclusively dependent on China for these critical raw materials. But there might be a way out. Der Spiegel
+ Reliable supplies of the raw materials necessary for the economy of the future is currently one of the most important challenges facing the global economy.
+ Millions of jobs, fighting climate change, Germany’s future geopolitical independence: All that hinges on the availability of lithium, cobalt, nickel and graphite – and on rare earths like neodymium and praseodymium.
+ "The race for the raw materials is also a race for our future prosperity,” says Peter Buchholz, head of the German Mineral Resources Agency (DERA), a state-run informational and consultancy platform.
+ Were the global competition for raw materials a horse race, the odds would currently favor China.
+ No country is home to larger mineral deposits and no country has been more active, more successful and more ruthless in exploiting them.
+ The European Center of Excellence for Countering Hybrid Threats (Hybrid CoE) has noted that China is increasingly turning to "economic coercion” as an instrument of geopolitical power.
+ Buchholz describes the current situation as a "systemic competition,” and says it is long past time for German companies to finally invest significant amounts of money into guaranteeing future supplies of raw materials.
+ Instead of simply buying what they need on global markets, Buchholz says they must invest in exploitation and refinement, including buying ownership stakes in mines.
+ "The best projects are currently being divvied up,” Buchholz says, and competitors from China are already in position. If the Germans don’t hurry, the DERA analyst says, the best deposits will all be gone.
+ The world, says one chemical industry executive, "was free, the markets were open, and prices were low.” Why bother devoting valuable capital to company-owned raw materials storage facilities?
+ The supply-chain breakdowns produced by the pandemic, the Russian invasion of Ukraine and China’s more aggressive stance toward Taiwan have combined to cast doubt on age-old assumptions that raw materials will always be accessible from somewhere. China has become far too irreplaceable, far too powerful as a supplier.
+ "The Middle East has oil, China has rare earths." -- Deng Xiaoping, Chinese leader, 1992
+ There are many reasons for why China is making its best-known export into a state secret. The raw materials business is rather filthy.
+ Dynamite and heavy machinery is used to extract elements out of the earth or rock that have been there for millions of years. It must be blasted to bits, pulled to the surface and washed, a process that requires vast amounts of energy and water – and sometimes also releases radioactivity.
+ "This is not anti-China … it’s pro-America.”
+ Biden’s Inflation Reduction Act (IRA) comes at a cost of $500 billion. The program is designed to put the U.S. on the path toward a "green economy,” and to push China out wherever possible.
+ One example is the $7,500 tax credit for electric vehicles, which came into effect in mid-April. It requires carmakers to source 40 percent of the critical minerals they need for their batteries either from the U.S. or from countries linked to the U.S. through a free-trade agreement.
+ That level is to climb to 80 percent by 2027. Furthermore, half of battery components must be assembled in North America, a share that will rise to 100 percent by 2029.
+ "There is an incredible race currently underway for the best deposits around the world." -- Jonathan Evans, CEO of Lithium Americas
+ Since the IRA entered force, more than $60 billion have been invested in more than 130 projects.
+ "We're at a dead end and there is no way of turning around." -- Martin Stillger, CEO of Thyssenkrupp Materials Services
Norway seeks to open vast ocean area to deep-sea mining: Country could become first to extract battery metals from its ocean floor. FT
+ Norway’s government is readying plans to open an area of ocean nearly the size of Germany to deep-sea mining as it seeks to become the first country to extract battery metals from its sea floor.
+ The country’s energy ministry is racing to submit to parliament in the next two weeks a proposal to open the vast area to applications for exploration and extraction. The plan would then face a parliamentary vote in autumn.
+ Metallic seabed crusts can meanwhile be mined for rare earth metals such as neodymium and dysprosium. These are used to make the magnets in wind turbines and in the engines of electric vehicles, but their supply chain is largely controlled by China.
François Hollande: ‘Putin cannot be seduced. He respects force’: The former French president on what his country wants in a leader, dealing with the Kremlin — and campaigning on a scooter. FT
+ Russia’s full-scale invasion of Ukraine has upended the postwar international order, and the China-Russian axis is tightening.
+ He soon discovered that the role itself was anything but normal in a nation that wants presidents to be at once Jupiterian and close to the people.
+ I start to ask why France expects presidents to be kings, and Hollande continues my sentence, “only to chop their heads off.”
+ The French public, he explains, wants a difficult balance: “Someone who embodies authority, and in whom they can then trust. But authority is not authoritarianism. It is founded on wisdom, on firmness but through conviction and respect.”
+ In his 2022 book Bouleversements (“Upheavals”), he describes his first encounters with Putin, when he was struck by a combination of cold determination, hostility towards the US and fury over the expansion of the Nato alliance. Hollande judged him then, and still does, as a rational actor who is a master in the elaborate art of lying.
+ “If you go to China only with economic interests in mind, and forget French political interests, you are less heard, and weaker,” he says.
+ Then he heaps praise on Ursula von der Leyen, the European Commission president, who accompanied Macron after delivering a strong speech on China. She is, in Hollande’s words, a leader who “laid down principles that were right.”
+ Macron won re-election, but he has not built a real political party that will necessarily survive him.
+ “If you stay in your usual camp and it’s narrower now and it’s more radical, well, you won’t gain anything.”
BBC: Boris Johnson: I've been forced out over Partygate report
Sky News: Boris Johnson stands down as MP with immediate effect
AP: Boris Johnson quits as UK lawmaker after being told he will be sanctioned for misleading Parliament
WSJ: Trump charged with 37 counts in unsealed indictment
WP: Trump indictment unsealed
+ The 49-page document contains 38 separate counts for the former president and a key aide
+ Trump has been charged with willful retention of classified information, withholding a record, conspiracy, false statements, and obstruction, according to a 49-page indictment released Friday
+ Trump ‘shared Pentagon map and described a plan of attack’
+ Federal criminal charges are the latest of at least six legal cases against ex-president
+ @maggieNYT: Every aspect of the indictment shows a historic element of Trump's personality: his showing off, his belief that everything is his, his thrusting his advisers into untenable positions, his admiration for people who evade scrutiny.
+ “Wouldn’t it be better if we just told them we don’t have anything here?” -- Donald Trump, according to one of his lawyers in the indictment, discussing the FBI subpoena for classified documents.
+ Jack Smith, the special counsel on the case, said he would seek a speedy trial. “We have one set of laws, and they apply to everyone.”
The ‘lock him up’ election: Whether Biden likes it or not, he will have to defend prosecuting Trump, who will absolutely end the case if he wins. Ankush Khardori
Congress should stop trying to make crypto happen: Republican proposal for new legislation would legitimize the digital asset industry and undermine investor protection. Hilary Allen
+ According to one recent survey, 75 per cent of Americans who have heard of cryptocurrencies are not confident in their safety and reliability.
+ As economists Andy Haldane and Vasileios Madouros wisely counseled, “as you do not fight fire with fire, you do not fight complexity with complexity.”
+ Blockchain technology has extremely limited utility. And the crypto industry built upon that technology can never deliver on its promises. The rest of the world is increasingly waking up to these limitations — Congress needs to wake up too, and stop trying to make crypto happen.
Louisiana passes bill that would require parental consent for kids’ online accounts: NYT reports the measure would allow parents to cancel the contracts underlying their children’s accounts on sites like TikTok, Instagram, Roblox and YouTube.
Airbnb won the pandemic and joined the Fortune 500. A looming recession is the next hurdle Fortune
Thinking small: Japan lures tourists away from big cities: Nation's travel industry welcomes visitors looking to get off the beaten track. Nikkei
Fortune: Coca-Cola looks to fizz up sales with a new soft-drink flavor targeted at video gamers
Bloomberg: Permira weighs sale of €2.5 billion shoemaker Golden Goose
+ Golden Goose shoes favored by Selena Gomez and Taylor Swift
+ Permira also considers the potential IPO of Golden Goose
The CEO behind the success of Lululemon and Reebok: ‘A reckoning is coming as Gen Zers hold retailers accountable for single-use plastics’ Bob Meers
+ An overarching issue in the conversation around single-use plastics is the ecosystem the industry is built on. This includes the resources, infrastructure, and factory setups–all centered on providing cheap, single-use items that generate profit at scale.
+ By addressing Gen Z’s environmental concerns, businesses, and governments are not just driving change, they are inspiring a shift in consumer behavior towards more conscious and responsible choices.
Neil Shen goes it alone in China after Sequoia split: Billionaire founder takes on the challenge after the break-up of partnership with the US. FT
+ “The degree of paranoia in Washington about Chinese technology is extraordinary,” said one US-based investor briefed on details of the Sequoia split.
Reuters: Bunge finalizing $30 billion-plus merger with Viterra
Bloomberg: Tesla set for $3 billion boost from Ford, GM charger deals
+ Automakers forge US charging standard by joining the Tesla network
+ Piper Sandler estimates growing revenue from non-Tesla owners
Detroit auto show vows to make a comeback in 2023. But which automakers can the show lure back? Automotive News reports the Detroit 3 are expected to participate with their full brand portfolios, although it's unclear what, if any, companies the show can win back after many sat out in 2022.
Sun Valley 2023 guest list includes Mark Zuckerberg, Ted Sarandos, Rupert Murdoch, Oprah, and more Variety
WSJ: Novak Djokovic advances to French Open final
Bloomberg: PGA golfers are now told to love LIV after forgoing its millions
+ Anger over bonuses, lawsuits, and Saudi links likely to linger
+ Sponsors, a critical source of cash, could seek to rework deals
The rise of Yasir Al-Rumayyan, the potential new king of golf: The PGA Tour’s Saudi disrupter loves the game and is fiercely loyal to Crown Prince Mohammed bin Salman. WP
+ Yasir Al-Rumayyan, a globe-trotting, Harvard-educated golf obsessive who appears poised to become the most powerful person in the professional game.
+ “Everybody in the world wants to get a meeting at PIF right now,” said Bradley Hope, co-author of “Blood and Oil,” which documents the crown prince’s global aspirations.
+ “He’s known as a very suave guy. He’s very at home in Davos, where he puts on a suit and he can easily mingle in those crowds, spend time on yachts with billionaires and things like that. At the same time, he knows Saudi Arabia, how it works.”
+ “He’s a consummate translator between the corporate West and Saudi Arabia. He can go between the two worlds really easily. Probably his highest value is his absolute loyalty to MBS, his ability to move between these two worlds.”
Saudi Arabia has bought into soccer and golf. Will the NBA and NFL be next? Karim Zidan
+ The most obvious league for Saudi investment would be the NBA.
+ Basketball is popular in Saudi Arabia – its national league was established in 1976 and its men’s team won the Arab Championship in 2018.
+ The NBA is a true global league, and has tens of millions of fans in Asia, Europe, South America and Africa who cut across a wide range of nationalities, races and religions.
+ In December 2022, the NBA’s board of governors voted to let sovereign wealth funds, pensions and endowments acquire minority stakes in its teams, widening the pool of prospective team owners.
+ It is worth noting that Saudi lobbyists did not meet with representatives from the NFL, which has a sole-ownership system and a “hard” salary cap that cannot be crossed.
+ The NFL is also notoriously run like an old boys’ club for very rich old white men.
+ Despite Saudi Arabia’s ever-growing influence in the world of sports, there are several obstacles that could limit its American ambitions, including US regulators such as the Securities and Exchange Commission and the Department of Justice’s anti-trust enforcers.
+ Ron Wyden, who serves as the US senate’s finance chair, called the PGA/LIV Golf merger a “shameless cash grab” and planned to “dive into every nook and cranny of Saudi Arabia’s deal …”
+ “As a start: US officials need to consider whether a deal will give the Saudi regime improper control or access to US real estate,” Wyden said in a statement.
+ Assuming the merger is allowed to go through, it will be interesting to see if US regulators attempt to protect other major sports leagues.
The untold story of Manchester City’s remarkable season: UEFA Champions League final is the last step in a Treble journey that featured dressing-room anger, Viking outfits – and royal approval. The Times
Enjoy the ride + plan accordingly.
-Marc
Marc A. Ross | Chief Communications Strategist @ Caracal
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