BLACKWATER USA | DAILY BRIEF

Posted by BW Actual on Jan 24th 2023

BLACKWATER USA | DAILY BRIEF

Ukraine

  • Poland said it would formally ask Germany for permission to send Ukraine Leopard 2 tanks, but - for the first time - expressed willingness to go around Germany if refused permission AND if other countries join a coalition to send advanced weapons like tanks.
  • Germany seems open to granting Poland permission to send tanks anyway and says it's just waiting for Poland to ask.
  • However, Russia is now threatening "retaliation with more powerful weapons" if advanced Western weapons are used "for striking peaceful cities and making attempts to seize our territory." That could complicate Germany's decision - and Poland's.
  • Bloomberg pointed out that many of these advanced Western weapons rely on Chinese rare earths that are shipped by train through Russia - the very country they're going to be used against. See article pasted below.
  • Separately, Pres. Zelensky announced imminent changes in central and regional government leadership stemming from a recently-completed investigation into corruption at multiple levels of government. One of the ousted officials was the deputy infrastructure minister, who was arrested and accused of taking a $400,000 kickback to ease the import of generators in the fall as the country prepared for winter freezes.
Russia
  • Russia gave Estonia's ambassador in Moscow until Feb. 7 to leave the country, and Estonia and Latvia evicted their Russian ambassadors in response. Tensions have been rising as the Baltic countries double down on their support for Ukraine.
  • Norwegian police arrested Andrey Medvedev, the former Wagner Group paramilitary commander who claimed asylum after crossing the border and offered to divulge information about Wagner war crimes. Officials say he was arrested for his own good: they implied Russia could be sending assassins to silence him.
Iran
  • The EU issued new sanctions on over 30 Iranian officials and organizations but stopped short of designating the Islamic Revolutionary Guard Corps (IRGC) a terrorist organization: EU policy chief Josep Borrell said that designation could only happen if an EU court found the IRGC guilty of terrorism (none have yet).
DRC
  • The Allied Democratic Forces claimed an attack in Beni that killed up to 24 people on Sunday. Regional officials are asking the army to boost its presence in North Kivu to better prevent future attacks.
Other News
  • The NYT wrote that Brexit has resulted in a shortfall of 330,000 workers - mostly in less-skilled jobs like farming, transportation, retail, and hospitality. A survey of British farmers found that 40% had suffered crop losses and over half had to scale down production.
  • Around 100,000 people turned out to protest right-leaning judicial changes proposed by Israel's conservative and religious government. The government seeks to shift power from the supreme court and judiciary to the Knesset (legislature), and protesters think that would undermine the fragile balance of power.
  • Pro-Kurdish protests in Stockholm last weekend incensed Turkey and could threaten to derail Sweden's hopes for joining NATO. Pres. Erdogan was particularly offended by a Swedish politician who burned a Quran at one of the protests and said Turkey would oppose Sweden's NATO bid as a result of it.
How Europe Needs Freight Trains to Cross Russia From China (Bloomberg)
  • Weapon systems rely on rare earth elements controlled by China
  • EU data show Russian rail a key conduit for strategic metals
Giving Ukraine modern tanks remains a key question facing Kyiv’s allies after a meeting of top defense officials in Germany on Friday yielded little progress. But perhaps the most exposed link in supply chains for producing such weapons runs on train tracks through the foe they’re trying to defeat.

Russia is at the center of a rail cargo route supplying Western arms manufacturers with a steady supply of metals needed to make the microchips, electronics and ammunition used in modern weaponry. Most of the so-called rare earth elements are mined in China. Russian Railways JSC and other carriers are hauling a rising volume of critical metals needed for Europe’s defense industry.

The volume of Chinese rare earth metals shipped on trains across Russia surged to 36,074 tons in the first nine months last year, more than double the amount transported in all of 2021, according to European Union data seen by Bloomberg News. The value of that trade rose by more than fourth-fifths, to €377 million ($408 million) through September.

“It is astonishing that despite all the sanctions, this supply chain still works,” said Michael Wurmser, the founder of Norge Mining Ltd. “It underlines the importance of those rare earths and shows how much we depend on them.”

Wurmser spoke from Davos, Switzerland, where he was meeting with industry executives trying to diversify supply chains of strategic minerals. Norge Mining has claims in Norway that include large deposits of vanadium and titanium, two metals critical for the defense industry, and whose production is currently dominated by China and Russia.

US Defense Secretary Lloyd Austin and North Atlantic Treaty Organization Secretary General Jens Stoltenberg met Friday at Ramstein Air Base in Germany together with other allies. The talks, intended to highlight allied unity, were somewhat overshadowed by Germany’s continued refusal to provide its Leopard 2 tank.

China supplies more than 90% of rare earth elements used in Europe, and the latest EU data show Russia railway lines remain a busy shipping lane and a key leg of Beijing’s “Belt and Road” initiative.

The Russian Railways cargo route remains crucial for European industry, and the EU published guidance in July clarifying goods transiting the country aren’t subject to sanctions.

Chinese-mined rare earths like lanthanum are widely used by Western weapons producers for armor-piercing ammunition. Most European demand for tungsten — a heavy metal used for anti-tank weapons made by Thales Air Defence Ltd. and Rheinmetall AG — is covered by China.

The war in Ukraine has exposed the Europe’s reliance on Russia’s railways and corridors for trade with China, according to an EU assessment previously reported by Bloomberg.

Even though volumes are just 3% to 4% of overall China-EU goods trade and are a fraction of ocean freight, rail shipments can shave weeks off of delivery. It takes as little as 16 days for a freight train departing from Wuhan, China, to cross Russia and arrive in Duisburg, Germany. Ocean cargo from Asia to northern Europe can take twice that long.

The rail journey from China to Europe can take several routes. Volumes through the northern corridor had grown significantly since 2016 reaching 692,500 containers measured in 20-foot equivalent units in 2021. But that number has dropped since Russia’s invasion of its neighbor, according to the EU’s analysis — 187,000 TEU were carried between January and April 2022.

Different Corridors
Alternative middle and southern corridors have capacity constraints, aren’t yet fully developed and are unable to absorb the losses from the northern route. This could become an issue in the medium- to longer-term but shouldn’t be an immediate concern because most of the crucial goods are not sanctioned, an EU official said.

Having adversaries with overlapping supply chains isn’t an entirely new phenomenon, said European Council on Foreign Relations military-trade analyst Rafael Loss. Japan used US scrap metal for its navy in World War II. During the Cold War, Soviet metal supplies helped stock western arsenals pointed at Moscow.

“What has changed is that compared to the Cold War era, economic tools of coercion have become more prominent in managing competition,” Loss said from Berlin. “It’s not always clear they have the intended effect, but they certainly have the capacity to disrupt supply chains.”

While the value of goods traversing rail lines only represents a sliver of the overall EU-Chinese trade relationship, Russia could increase the costs and challenges for European importers if Moscow moved to block the 15 train cars per day that typically transit the route.

Disrupted access to Chinese tungsten mines, which accounted for more than 83% of world production, could leave western economies particularly vulnerable.

The metal is critical for a range of products — from batteries to magnets and microchips and together, China and Russia control almost two-thirds of identified reserves — and demand is being driven by “defense spending fueled by the Ukraine and Russia conflict,” according to Tungsten West Plc, which is trying bring a new mine in southwest England online this year.

“The competition for resources is about to become even more intense,” Loss said.