The World That Was

Adrian Olivier,

Sunday 4 June – Sunday 11 June:

On Sunday OPEC+ members (OPEC and 10 other countries, the most important of which is Russia) agreed to a new output cut. Saudi Arabia will voluntarily reduce output by 1 million barrels per day (bpd) from July in a bid to boost the price of oil, which has lowered over the past 10 months despite a previous cut in April. The reduction will lower Saudi Arabia’s output to 9mn b/d in July. This will be a total of 1.5 million bpd cut this year from April’s high of 10.5 million bpd. According to IMF estimates, Riyadh needs an oil price above $80 a barrel to balance its budget and fund some of the megaprojects that Crown Prince Mohammed bin Salman hopes can transform its economy. That the Saudis felt another cut was necessary underlines the uncertain outlook for demand for fuel in the months ahead. There are concerns about economic weakness in the U.S. and Europe, while China’s rebound from COVID-19 restrictions has been less robust than many had hoped. As part of the deal, the weaker African producers will have reduced production quotas beginning in 2024, but the UAE has been pushing for a higher production, following greater investments in its oil industry. Its production target will increase by around 200,000 bpd from January to 3.2mn bpd.

Also on Monday, American technology giant Apple released its much-hyped Vision Pro mixed-reality headset at its annual Worldwide Developers Conference, which had many questioning whether Apple has lost its innovation mojo. Vision Pro is Apple’s first major new product in nearly a decade and the announcement saw investors unimpressed – the stock fell by 1% within 15 minutes of the announcement.

Early on Tuesday morning, between 02:00 – 03:00, the Kakhova Dam – which lies on the Dnieper River in the Kherson Oblast of Ukraine – was destroyed. The 30 metre tall and 3.2 kilometre long dam has been under Russian control since the early days of the Russian invasion of Ukraine – all indications suggest Russian involvement, despite the flooding of some of their own defensive fortifications. There is a short-term tactical benefit for the Russians to blow the dam – everything south of the dam is now flooded. Of course, this water will recede and flow into the sea, but in the days it takes for this to happen the ground will become sodden. Heavy vehicles will struggle to pass through the ground which is now muddy – much like the muddy season which has prevented a Ukrainian attack. With this action, Russian command has reduced the area over which Ukrainian forces can counter-attack.

Tuesday saw New York City topping the list of cities with the world’s worst air pollution, as smoke from hundreds of fires in Canada blew south to blanket the east coast of North America. NYC’s air quality index was above 200 (very unhealthy) at around 10 p.m. local time, the worst of any major metropolitan area in the world – surpassing New Delhi, Doha, Baghdad and Lahore. This is more than 10 times the guidelines set by the World Health Organisation (WHO). Schools in the city were closed, and outdoor events and activities were cancelled and authorities called on people to remain indoors. Wildfire smoke contains very tiny particulate matter, or PM2.5, which also comes from the combustion of fossil fuels and dust storms. When inhaled, it can travel deep into lung tissue and enter the bloodstream and is linked to asthma and other respiratory illnesses and heart disease. Millions of people die each year from air pollution-related health issues. Those most vulnerable are the old, the young, pregnant women and those will respiratory or cardiovascular diseases. In 2016, the WHO says around 4.2 million premature deaths were associated with fine particulate matter.

On Tuesday, the U.S. Securities and Exchange Commission (SEC) sued popular cryptocurrency exchange Coinbase for running an unregistered securities exchange. This follows Monday’s announcement that the SEC was suing another cryptocurrency exchange, Binance, alleging that it commingled billions of dollars of customer funds, engaged in wash trading (an illegal activity in which a single trader buys and sells the same security in order to generate misleading market information), and operates an unregistered securities exchange, among other claims. Though both companies face securities laws violations, they are fairly different lawsuits. In the Binance suit, the exchange and its CEO Changing Zhao (commonly referred to as CZ), along with two other individuals, are facing 13 charges – including lying to regulators about its operations. The security allegations against Binance and Coinbase are an existential crisis for the crypto industry as the classification of cryptocurrencies as securities could negatively impact the market for years to come. Despite the risks, the crypto market was relatively calm in the 24 hours following the lawsuit announcements – Bitcoin and Ether fell around 2% and less than 1% respectively. The global crypto market cap decreased 2.7% to $1.1 trillion, during the same time frame. As of today, the price of Bitcoin is $25,757.80 and Ether is trading at $1,753.46. 

On Wednesday before sunrise, the Kīlauea volcano, located along the southeastern shore of the Big Island of Hawaiʻi, erupted. Lava began spewing from the Halemaʻumaʻu crater of the volcano at 4:44 a.m. Hawaii Standard Time and largely remained confined to the Halemaʻumaʻu crater, which has been closed to the public since 2007 and is within the Hawaii Volcanoes National Park. By about 3 p.m., initial lava flows were between 13 and 30 feet high and covered the crater floor, an area of about 370 acres. Some of the fountain bursts of lava were spewed 200 feet (60 metres) into the air. The largest fountain maintained a consistent height of about 50 feet (15 metres). The U.S. Geological Survey (USGS) issued a red alert in response, but on Thursday lowered the warning level as the eruption remained confined to the Halema’uma’u crater. The volcano is between 210,000 and 280,000 years old and emerged above sea level about 100,000 years ago. The past several summit eruptions at Kīlauea have started “vigorously and then decreased over time,” and this latest eruption seems to be following a similar pattern, according to the USGS. Officials lowered the alert level to “watch” on Thursday, saying the activity is confined to the Halema’uma’u crater. Lava fountain heights have decreased since the eruption began, “likely due to gas loss,” but remain up to about 10 meters (nearly 33 feet) high, the US Geological Survey said in a status update Thursday. Officials say there are no indications that populated areas are threatened.

Ukraine began its counteroffensive this week, with probing attacks against Russian forces in multiple axes of advance beginning on Monday. Ukrainian President Volodymyr Zelensky refused to call these initial attacks the start of the offensive, saying only that they were “local actions”. Zelensky only announced on Saturday that the offensive was underway against Russian forces: “Counteroffensive and defensive actions are taking place in Ukraine. At what stage, I will not say in detail,” Zelenskyy said in a joint news conference with visiting Canadian Prime Minister Justin Trudeau. Thursday saw the first major battle in Ukraine’s counteroffensive, with Ukrainian forces attacking southwards on the Zaporizhzhia front around the city of Orikhiv. Ukrainian forces broke through the first Russian line of defence, however Russian forces counterattacked with an “uncharacteristic degree of coherency” and pushed Ukrainian forces back. Russian claims of heavy Ukrainian losses in this initial assault have been confirmed by U.S. officials. Included in the losses were the first of the German-made Leopard 2A6 tank and the American Bradley Infantry Fighting Vehicle (IFV). Ukrainian forces continue to press the assault on the Zaporizhzhia front as they attempt to cut the Russian land bridge to Crimea. The Russians have had months to prepare for the oncoming Ukrainian assault. It is unrealistic to expect that Ukraine would be able to storm these defences without casualties. Ukrainian forces should expect 25%-plus casualties at the very least – even if everything goes right. 

On Friday, the Department of Defence announced a new $2.1 billion support package for Ukraine. The included weapons are.”: additional munitions for Patriot air defence systems; HAWK air defence systems and missiles; 105mm and 203mm artillery rounds. The Pentagon claims the U.S. has now committed $39.7 billion in security assistance, however a German think tank called the Kiel Institute has claimed American military aid has already topped $45 billion. Congress has authorised the White House to spend $18 billion through the Ukraine Security Assistance Initiative (USAI) in 2023 – the Pentagon has announced $10.8 billion in arms purchases using the USAI this year.

The biggest news on Friday was the unsealing of the 49-page indictment against former President Donald Trump (the full text can be read here). In short, the charges against him are storing and sharing classified information regarding 

defence and weapons capabilities of both the United States and foreign countries; United States nuclear programs; potential vulnerabilities of the United States and its allies to military attack; and plans for possible retaliation in response to a foreign attack. The unauthorised disclosure of these classified documents could put at risk the national security of the United States, foreign relations, the safety of the United States military, and human sources and the continued viability of sensitive intelligence collection methods.

In two speeches made in Georgia and North Carolina, Trump railed against the indictment – which he called “hoax” and a “joke” by a “corrupt political establishment” – declaring that he would never yield or be deterred. “We’re going to stand up to the current political establishment … and we’re going to finish the job we started, the most successful presidency,” he said. The crowd broke out in chants of “USA, USA”. 

In the week ahead:

The Federal Reserve will hold its June Federal Open Market Committee (FOMC). The US Secret Service is preparing for Trump’s appearance at a federal court in Miami next week in relation to his indictment.