Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Efforts in a row to reassure Taiwan as Pompeo urges formal recognition of Taiwan

Written by Ian Ng, researcher
Edited by Adam Shaw, associate partner

4 March 2022 

Good morning,

Many have found similarities between the Russia-Ukraine and China-Taiwan relationships. Taiwan and Ukraine are two democracies that face similar situations in the form of neighbouring and powerful authoritarian states with imperialist visions that are taking active steps to undermine their sovereignty.
 
Although China has not yet invaded Taiwan, President Xi has stated his ambition to bring the island under the control of Beijing before 2050, using force if necessary.
 
Anxiety has grown in Taiwan after the refusal by the US to intervene in Ukraine. However, policymakers in Washington do appear committed to Taiwan’s security. The Biden administration ordered the warship USS Ralph Johnson to transit through the Taiwan strait on Saturday, in a move that irked Beijing.
 
This followed the arrival of a delegation led by former chairman of the US joint chiefs Michael Mullen on Wednesday, in a further effort to reassure Taiwan. Leaders of the Quad group of countries – the US, India, Australia and Japan – have also said that what Ukraine has experienced should not be allowed to happen in the Indo-Pacific.
 
However, former secretary of state Mike Pompeo has gone furthest by urging the US to formally recognise Taiwan as an independent country, a move that would seriously test relations with Beijing, during his own trip there
 
Pompeo meant a great deal to Taiwanese. He was seen as the most “pro-Taiwan” secretary of state in history and Taiwan president Tsai Ing-wen called him a “good friend” of Taiwan. During his tenure, he ended the engagement policy towards China and lifted restrictions on the State Department’s contact with Taiwan. Although this is yet to become a bipartisan consensus, we would be likely to see more heated exchanges between China and the US if Pompeo – a potential Republican candidate for the 2024 presidential election, who was sanctioned by China – were elected.
 
Fears of imminent invasion by the Beijing government appear unfounded, at least for now. Taiwan is an island separated from China while Ukraine and Russia share a land border, meaning any invasion would require a much larger-scale operation. In addition, it can be argued that Taiwan has a strategic importance to the US, one that Ukraine may not have. As White House national security advisor Jake Sullivan put it: “The Taiwan Relations Act is a unique instrument — we don’t have it with other countries; we don’t have it with Ukraine — that does talk about American commitments to support Taiwan in various ways.”
 
Sadly for Ukraine, that appears to be where its comparable situation with Taiwan diverges: its strategic importance to the US.

News

A fire has broken out at Ukraine’s Zaporizhzhia nuclear plant, the largest nuclear power station in Europe, after shelling from Russian forces. The Ukrainian State Emergency Service reported that radiation at the plant was “within normal limits”. Ukraine’s president Volodymyr Zelenskiy urged Europe to “wake up” as he accused Putin of nuclear terrorism.
 
The Kremlin has denied that it plans to institute martial law in Russia. Since the invasion of Ukraine started, there have been rumours that Moscow may ban citizens from leaving the country and to conscript citizens to join the invasion. The Duma, Russia’s parliament, will convene an extraordinary session today and there were unsourced reports that the borders may close after the meeting.
 
Georgia and Moldova have officially applied to join the EU one week after the invasion of Ukraine. The topic of enlargement has always been sensitive among EU member states and the former-Soviet countries applying may spark fresh tensions within the bloc.

Business and economy

The British Chambers of Commerce has estimated Britain’s economic growth will halve this year as a result of inflation, tax rises and the invasion of Ukraine. The business group said it expects inflation to hit eight per cent, cutting disposable incomes, and interest rates to increase to 1.5%
 
Commodity prices and raw materials costs were predicted to soar to the highest level since 2008 due to the invasion of Ukraine. With US oil hitting its highest level since 2008 and oil prices jumping above $114 a barrel, Energy UK predicted the energy bill for the average UK household could reach £3,000per year in October.
 
Consulting firms Accenture, McKinsey and BCG have joined other western companies in suspending client work in Russia. McKinsey and BCG initially announced that they will not serve state-owned entities but stopped short of dropping other clients.

Columns of note

The Editorial Board of The Financial Times argues that Europe should end its reliance on Russian energy. It states that the Nord Stream 2 pipeline helped Vladimir Putin to gain a strategic advantage and Europe must now find an alternative for Russian gas, in case energy supplies are cut off by Moscow and to put pressure on the Kremlin.
 
Emma Duncan writes in The Times about how sanctions on Russia may finally end globalisation. She argues that sanctions on Russia may deepen the division between the free world and the authoritarian world. The increase in energy costs and lower demand for goods due to isolated markets could cause a shrinkage in world trade, hitting Britain as a trading nation especially hard.

Markets

What happened yesterday? 

London stocks fell sharply on Thursday as the invasion of Ukraine continued. The FTSE 100 ended the session down 2.57% at 7,238.83 and the FTSE250 was 3.35% weaker at 20,079.70. On Wall Street, the S&P 500 index ended the day down 0.53%, while the Dow was down 0.29%.
 
On the currency markets, sterling was trading 0.53% lower against the dollar at $1.3335 but was up 0.07% on the euro to €1.2066.

What’s happening today?

AGM
Jpmorgan Rus
Asia Strategic
 
EGM
Challenger En
Riverstone Energy

Final Results
Morgan Advanced Materials
F.b.d.hldgs
Essentra
Hammerson
Tcs Group S
 
Intl Economic Announcement
(13:30) Unemployment Rate (US)
(13:30) Non-Farm Payrolls (US)

Source: FTSE 100, Financial Times

did you know

In 1901, California banned homework.

Parliamentary highlights

House of Commons 

No business scheduled.

House of Lords 

Legislation
Elderly Social Care (Insurance) Bill – third reading
Organ Tourism and Cadavers on Display Bill – third reading
Education (Environment and Sustainable Citizenship) Bill – third reading
Education (Careers Guidance in Schools) Bill – second reading
Local Government (Disqualification) Bill – second reading
Taxi and Private Hire Vehicles (Safeguarding and Road Safety) Bill – second reading
Office for Demographic Change Bill – second reading

Scottish parliament 

No business scheduled.

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