Coming Up This Week

• The annual Consumer Electronics Show opens in Las Vegas tomorrow. This year's tech show will have a heavy focus on new developments in artificial intelligence (AI).
• The Dakar Rally, an epic off-road endurance motor race, started Friday and will run through Jan. 19 - and across around 8,000 km (5,000 mi) of Saudi Arabia. Dakar was one of the first sporting events Saudi invested in hosting: the rally has been held there since 2020.
• Taiwan's presidential election is Saturday. Analysts like the author of the op-ed pasted below believe the outcome will have outsized geopolitical implications for the U.S. and China.

Commodity Prices

• Aluminum: $2,274/ton
• Antimony (ingot min. 99.65% fob China): $12,200/ton
• Cobalt: $29,135/ton
• Copper: $8,463/ton
• Gold: $2,023/toz
• Lead: $2,076/ton
• Natural Gas (Nymex): $2.80/MMbtu
• WTI Crude Oil (Nymex): $71.58/barrel
• Zinc: $2,563/ton

China

• Bloomberg reported that Pres. Xi's recent purge of senior military officials - including defense minister Li Shangfu - is connected with a long-running investigation into severe corruption within the People's Liberation Army (PLA).
• In one particularly egregious case, the PLA fielded missiles filled with water instead of fuel.
• Bloomberg cited unnamed U.S. intelligence sources who suggested the rot could be so severe that it hinders the PLA's combat readiness and forces Xi to think critically about his previously unwavering push to rapidly modernize the PLA.
• Separately, China said it detained a foreign consultant on charges of spying for the UK's MI6.

Gaza and Israel

• Lebanon's Iran-aligned Hezbollah militia said it fired 62 rockets towards northern Israel as "an initial response" to the apparent (but not officially acknowledged) Israeli drone strike that killed a senior Hamas official in Beirut.
• Israeli forces fired back at Hezbollah positions in Lebanon, killing at least seven militants - and raising concerns about a broader conflict.
• U.S. SecState Blinken is visiting Israel and Jordan this week in an effort to prevent a spillover into broader regional conflict.
• Meanwhile, Israeli officials claimed a breakthrough in dismantling Hamas's command structure in northern Gaza.

Afghanistan

• Islamic State-Khorasan (IS-K) claimed an overnight attack targeting minority Hazara Shias in Dasht-e-Barchi, eastern Afghanistan.
• The Taliban claims its counterterrorism operations have reduced IS-K attacks within Afghanistan by 90% over the past year, but this incident and last week's IS-K cross-border suicide bombings in Kerman, Iran show the group is undeterred and still plotting attacks.

Libya

• Libya's state-owned National Oil Corporation declared force majeure at Al Sharara oilfield "due to the closure of the site by protesters."
• Al Sharara is Libya's largest oilfield, providing about 25% of NOC's daily output...which is why rival factions regularly stage protests and blockades seeking their cut of Al Sharara's rich proceeds.

Azerbaijan

• Azerbaijan said it would expand gas production by at least one-third over the next 10 years. Environmentalists criticized the announcement and complained that it raises doubts about Azerbaijan's fitness to host this November's COP29 climate talks.

Other News

• Bangladesh voted in an unsurprising election yesterday: PM Sheikh Hasina's Awami League party ensured Hasina's reelection to a fifth term by cracking down on the opposition, which boycotted the vote.
• The UAE confirmed rumors that it's prosecuting 84 prisoners on charges of forming a "secret organization" to commit "acts of treason and terrorism" in a single mass trial.
• Several human rights campaigners are believed to be among the defendants, leading critics to characterize the trial as a crackdown on dissent rather than a quest for justice.

The US and China win no matter who takes Taiwan’s helm (The Hill) Author: Seong-Hyon Lee is a senior fellow with the George H. W. Bush Foundation for U.S.-China Relations and a Harvard University Asia Center visiting scholar.
As the Taiwanese presidential election draws near, speculation is rife with discussions on how the results will influence the delicate trilateral relationship between Taiwan, the United States and China.

Often characterized as a proxy war between the superpowers, the reality of the situation is far more nuanced and indicative of a complex geopolitical chess game where, surprisingly, both the U.S. and China stand to gain regardless of the election’s outcome.

The election, set for Jan. 13, sees the pro-U.S. and anti-China Democratic Progressive Party candidate Lai Ching-te leading the polls against the Kuomintang candidate Hou Yu-ih, who is seen as more accommodating towards Beijing.

At the heart of the election is a stark choice presented to the Taiwanese people: one between peace or war as advocated by the Kuomintang, and democracy or dictatorship, as framed by the Democratic Progressive Party. Recent developments have seen Lai leading by a significant margin, suggesting a possible continuation of the Democratic Progressive Party’s rule.

The implications of either party winning are profound on an international scale. Should the Kuomintang, which promotes a “One China” principle, secure victory, cross-strait relations would likely stabilize. This stabilization would serve to alleviate the imminent threat of military conflict, benefiting both the U.S. and China by maintaining the status quo and ensuring continued economic and political engagements in the region. A Kuomintang victory would be perceived as a win for China, possibly paving the way for closer ties with Taiwan.

Conversely, a victory for the Democratic Progressive Party, which broadly advocates for Taiwan’s independence, complicates the cross-strait relationship significantly. For the U.S., a Democratic Progressive Party-led Taiwan could be a strategic asset, providing leverage against China in the broader geopolitical contest for power in the Indo-Pacific region. The U.S. would likely deepen its ties with Taiwan, further integrating the island into its network of alliances and partnerships to counterbalance China’s regional influence.

For China, while a Democratic Progressive Party victory might seem unfavorable at first glance, it presents an opportunity for Xi Jinping’s administration to consolidate power internally.

By framing the Democratic Progressive Party as an external antagonist, the Chinese government can foster national unity and justify its authoritarian grip under the guise of protecting national sovereignty. Furthermore, the heightened tensions can be leveraged to accelerate China’s military and economic strategies in the region, possibly galvanizing nationalist sentiments and strengthening the Chinese Communist Party’s domestic position.

Broadly, the Taiwanese presidential election is a focal point in the U.S.-China rivalry, encapsulating the broader strategic competition in the Indo-Pacific region. However, it is also a testament to the complex dynamics of international politics, where adversarial relationships coexist with interdependence.

Whether the Kuomintang or Democratic Progressive Party emerges victorious, the implications will resonate beyond Taiwan’s shores, affecting the geopolitical calculus of both the U.S. and China. Ultimately, the election is not just about who takes Taiwan’s helm but about how the shifting balances of power will redefine the future of regional and international order.

The presupposition that both the U.S. and China might find strategic advantages in the election’s outcome does not diminish the real risks and uncertainties that lie ahead.

Given the complexities of the Taiwan election and its potential impact on the U.S.-China geopolitical landscape, the U.S. should focus on strengthening diplomatic and strategic ties with Taiwan, regardless of the election outcome. In case of a Democratic Progressive Party victory, which may lead to heightened tensions with China, the U.S. should be ready to provide support to Taiwan while managing relations with China judiciously to avoid escalating conflicts.

Fostering and nurturing a positive public perception among the Taiwanese people has also taken on a heightened significance, underscored by Washington’s far-reaching geopolitical interests in the Asia-Pacific region. This imperative extends beyond mere optics, encompassing a multifaceted strategy that involves bolstering economic and security partnerships, reaffirming unwavering support for democratic values and regional stability and positioning for potential shifts in the geopolitical landscape.

Beyond the political arena, the election’s outcome has significant economic implications, particularly concerning the global semiconductor industry. This was underscored in February 2023 when Berkshire Hathaway divested from Taiwan Semiconductor Manufacturing Company, citing geopolitical concerns. This move reflects broader anxieties about the region’s stability and its impact on American and allied businesses.

To navigate these uncertainties more effectively, it is vital for Washington to support these companies in comprehending cross-strait developments and adjusting their strategies accordingly. Furthermore, enhancing collaboration on supply chain resilience among allied nations is of utmost importance.

Given the potential for the election to influence trade and economic policies, especially in the Indo-Pacific region, U.S. businesses must prioritize supply chain flexibility and preparedness for potential geopolitical changes.