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Sri Lankan Commando Regiment members in Colombo, Sri Lanka.

REUTERS/Dinuka Liyanawatte

What We’re Watching: Sri Lanka’s shrinking military, mass shootings in America, McCarthy’s Taiwan visit, a common currency pipedream

Sri Lanka’s military downsize

In its latest bid to cut the economic fat, Sri Lanka's government announced that it will downsize its army, aiming to reduce the number of military personnel from 200,783 to 135,000 by next year and to 100,000 by 2030. Sri Lankan defense officials say the army is restructuring in order to boost its tech capabilities, primarily in cyberspace. But analysts highlight that this is part of President Ranil Wickremesinghe’s pledge to slash the bloated public sector, a precondition to unlocking a $2.9 billion bailout package from the International Monetary Fund. Crucially, military salaries make up around 37% of public wage costs. Cash-strapped Sri Lanka defaulted on its external debt for the first time in May 2022, after years of economic mismanagement led to acute fuel and food shortages – and forced Colombo to borrow heavily from India and China. With the bulk of Sri Lanka’s defense spending going to salaries rather than investment in equipment, this plan presents an opportunity for the country to correct its balance sheet. But some critics worry that Colombo, facing an internal terror threat, could be moving too hard too fast.

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Semiconductor manufacturing.

Annie Gugliotta.

The semiconductor battle is heating up

Global semiconductor supply chains have some big resistance points that threaten to make microchips a macro-geopolitical flashpoint. On Tuesday, US President Joe Biden will visit Taiwanese chipmaker TSMC’s facility in Arizona, where he'll spotlight the White House’s efforts to ramp up US chip manufacturing amid the US-China chip race.

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In technology, as in geopolitics, a little resistance can make all the difference. Consider semiconductors, the nearly invisible microchips essential for running everything from our computers to our cars to our cruise missiles. They work by doing something deceptively simple: They use carefully calibrated resistance to slow the flow of electricity through a circuit in ways that make computing possible. The smaller they get the more powerful our devices become.

The trouble is, global semiconductor supply chains have some big resistance points of their own, choke points that threaten to make microchips a macro-geopolitical flashpoint.

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Editions of Taiwanese newspapers reporting on U.S. House Speaker Nancy Pelosi's historic visit to Taiwan.

Kyodo via Reuters Connect

What We're Watching: Tensions in Taiwan, violence in Nagorno-Karabakh, Erdoğan in Russia

(More) trouble in Taiwan

Tensions in the Taiwan Strait are now at their highest level in a quarter-century after China fired ballistic missiles at waters near the self-governing island on Thursday. The launch was part of broader live-fire drills scheduled to conclude on Sunday — Beijing's furious answer to US House Speaker Nancy Pelosi visiting Taiwan earlier this week. So, what might happen next? We're keeping an eye out for three things. First, whether China escalates even further by shooting missiles into waters off eastern Taiwan — thus violating the island's airspace, tantamount to declaring war. (By the way, the Chinese might need a bit of target practice after five projectiles landed inside Japan’s EEZ.) Second, how the drills will impact navigation and trade in the region, with many flights cancelled and cargo ships now avoiding the Taiwan Strait. Third, how the US will respond: 26 years ago Bill Clinton ended the last major US-China standoff over Taiwan in one military fell swoop, but it's unlikely Joe Biden will have the appetite to risk all-out war with China. Sanctions? Strong-worded statements blasting Beijing and supporting Taipei? You bet. But that'll be the end of it. Meanwhile, 23 million Taiwanese people will spend the next few days frantically awaiting China's next move.

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European Commission holds a news conference in Brussels.

REUTERS/Yves Herman

What We're Watching: EU's energy conundrum, Plan B for Ukraine grain exports, war games in Taiwan, robot revenge

EU’s deepening gas woes

Europe’s gas crisis went from bad to worse on Monday after Russia announced that it would slash deliveries to Germany via the Nord Stream 1 pipeline to 20% capacity beginning this week. The Kremlin’s dramatic move is further testing the European Union’s cohesiveness just days after Brussels called on members to voluntarily cut natural gas consumption by 15% until at least April 2023. The European Commission, the EU’s executive arm, wants its 27 member states to cut back in order to boost stockpiles ahead of winter as Russia continues to use its natural gas exports as a political weapon. But the sense of European unity that defined the early stage of the war – when the bloc rallied together to enforce crushing sanctions on Moscow – is now waning. Countries like Spain and Portugal that rely less on Russian natural gas than the Germans and Italians, say the plan doesn’t account for EU countries’ disparate needs (a diplomatic way of asking why the heck they should suffer because Berlin has failed to diversify its energy portfolio). Though Brussels prefers for the plan to remain voluntary, it has threatened to make reductions in gas consumption mandatory across the bloc. The plan could go to a vote as soon as Tuesday and requires 15 of 27 states to back it. For now, the bickering continues.

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