Happy Hump day!

Today we have ...

  • The GOP in disarray
  • Russian carnage
  • Angry Bolivian farmers
  • Banksy thieves in Ukraine
  • A bad start for Bibi
Thanks for reading,

- The Signalistas

Rinse, repeat: Republicans fail to agree on the House speaker

Gabrielle Debinski

Traditionally, the first day of a newly elected Congress is filled with pomp and circumstance. Children wearing little suits and frilly dresses accompany their parents to the House floor where a new class of lawmakers is sworn in.

But the first day of the 118th Congress was not very joyous for one man in particular: Kevin McCarthy. In an embarrassing series of events, the leader of the House GOP failed to secure a majority of votes – 218 – needed to become House speaker. After three rounds of voting, 20 Republican holdouts still refused to budge, backing candidates not named McCarthy for the role. What’s more, McCarthy actually shed a vote in subsequent ballots.

This infighting over the speakership is not only extremely embarrassing for the Republican Party, but it's also extremely rare. Indeed, it's the first time in 100 years that the House failed to elect a speaker on the first ballot. In 1923, it took nine rounds of voting to coalesce around a single candidate. McCarthy is now headed to round four.

The House speaker is a big gig. Whoever assumes this role is second in line to the presidency after the vice president and is responsible for overseeing all legislative and administrative proceedings in the lower chamber. In short, the speaker matters. They decide which bills come to the House floor for a vote, and assign caucus members to committees that have powerful subpoena powers. What’s more, because the lower chamber holds the power of the purse, the speaker of the House has an outsized role in deciding how and when to fund the federal government.

A problem of his own making. McCarthy, who rose through the ranks of California’s Republican Party, has played an active role in shaping the contemporary House Republican caucus. Not only has he helped recruit a class of hardline GOP candidates over the past decade, but he’s also positioned himself as a political contortionist who bucks party trends for his own political gain. Consider that in 2013, McCarthy, then majority whip, voted against a financial fiscal cliff bill that he had been trying to garner votes for in order to endear himself to hard-right conservatives.

Now what? The role of speaker is so central to the business of government that nothing can get done until this dumpster fire is sorted and someone clinches 218 votes. Given that McCarthy still doesn’t appear to have the numbers, that process could go on for days – or even weeks. But even if McCarthy manages to eke out a victory, he’ll emerge a diminished figure beholden to the ultra-conservative wing of his party that’ll threaten to pull the plug on his speakership if/when they don’t get their way. So far, McCarthy is not thriving in 2023.

What We’re Watching: Bolivia’s angry farmers, Putin vs. the Hawks, Bibi’s bumpy beginning

Carlos Santamaria

Bolivian farmers vs. the government

Political trouble is brewing in Bolivia. For over a week now, farmers have been blocking roads in and out of the agricultural hub of Santa Cruz after the region's governor, right-wing opposition leader Luis Fernando Camacho, was arrested for his alleged involvement in the 2019 ouster of then-leftist President Evo Morales. Camacho lost the 2020 presidential election to Morales’ protégé, Luis Arce, and the two have butted heads ever since. But there's more to it: The protesters also want the national government to carry out a long-delayed census that would give Santa Cruz — a relatively affluent region populated mainly by non-Indigenous Bolivians — more tax revenues and seats in Congress. For his part, Arce says that the farmers are a front for business elites who don't want to share the profits of their lucrative beef and soy exports with poorer metal-producing regions, where the president's Indigenous base resides. So, what might happen next? The protesters won't go home until Camacho goes free, and meanwhile, the standoff is costing Bolivia millions of dollars in lost agricultural trade.

Russian retaliation?

It’s still unclear how many Russian soldiers were killed in the early hours of New Year’s Day by a precision-guided, Ukrainian rocket attack on a Russian barracks in eastern Ukraine. The Russians admit to 89 dead. Ukrainians claim the true number was “about 400.” Either way, Ukraine’s successful attack has dealt another heavy blow to the reputation of Russian commanders. Why, many Russian hawks have wondered publicly, were so many soldiers housed together within range of Ukrainian weapons, particularly the US-made HIMARS guided rocket system? Why was so much combustible (and poorly hidden) ammunition stored so close to their location? Pro-war Russians, active on the social media site Telegram and other communications channels, want answers, and even some Kremlin-aligned lawmakers have called for an investigation. A probe is now underway, and Russian officials on Wednesday pointed fingers at the soldiers' use of banned phones that allowed the enemy to locate them. This story highlights yet again the context in which President Vladimir Putin makes decisions. Since the early days of the invasion, anti-war critics have been jailed for up to 15 years for criticizing the Russian military. But there’s no shortage of pro-war voices calling publicly for the heads of Russian top brass they accuse of incompetence. Putin’s willingness to appease the hawks while imprisoning the doves makes clear which side he sees as the greater threat to his future. That’s why we’re watching to see what hyperdestructive act of retaliation against Ukraine Putin will order to impress those who publicly demand accountability and absolute victory.

A bad start for Bibi

Israel’s new government, led by PM Benjamin “Bibi” Netanyahu, received a string of international scoldings on Tuesday after National Security Minister Itamar Ben-Gvir visited a flashpoint site in Jerusalem that Jews call the Temple Mount and Muslims refer to as Haram al-Sharif. The site, the holiest in Judaism and the third holiest in Islam, houses the Al-Aqsa Mosque. Ben-Gvir, a contentious figure who heads the far-right Jewish Power Party, says he wants to change the status quo at the compound – in place since 1967 – that says Jews cannot pray at the site. (Since then, Jordanians have acted as de facto custodians of the site.) A visit to the area by opposition leader Ariel Sharon in 2000 was seen as an immediate trigger to the Second Intifada. Netanyahu, for his part, played down Ben-Gvir’s visit and said he won’t change the religious status quo. Still, Netanyahu is likely seething given that Ben-Gvir’s move undermines his attempt to reassure new allies in the Gulf that he is committed to deepening relations with the Muslim world. Bibi said that a delay to this week's planned trip to the United Arab Emirates has nothing to do with it, but news of the postponement dropped shortly after Abu Dhabi criticized Israel over Ben-Gvir's visit. Condemnation from the Saudis was also a blow for Netanyahu, who has made no secret of the fact that he wants the normalization of ties with Riyadh to be his next legacy. Netanyahu has pushed back against claims that he has no control over an unruly coalition made up of religious and far-right parties. This episode does not help his cause.

Tools and Weapons Podcast Season 2


Microsoft's Vice Chair and President Brad Smith’s podcast, Tools and Weapons, is now in its second season, continuing to expand on the themes of the NY Times bestselling book he co-authored with Carol Ann Browne. In this month’s episode, Brad sits down with Greece’s Prime Minister Kyriakos Mitsotakis, covering Greece's ambition to be an energy hub for Europe, its efforts to digitally preserve ancient cultural sites, and what it takes to protect democracy itself. Subscribe and find new episodes monthly, wherever you listen to podcasts.

Exclusive Maru/GZERO poll: Tired of fighting, slim majority of Americans back divided government

Gabrielle Debinski

Many pundits in the US have long declared the age of political bipartisanship dead. And in the age of QAnon, “lock her up,” and “defund the police,” it’s easy to see how they might have reached such a conclusion.

Still, as divided government returns to Washington – with the GOP now in control of the House of Representatives – it appears that the constant mudslinging between Democrats and Republicans is not necessarily appealing to American voters.

An exclusive new poll conducted by Maru Public Opinion and GZERO Media found that a narrow majority of Americans – both Republicans and Democrats – think divided government is better for the country. Of the randomly selected 1,517 American adults polled (estimated margin of error of +/- 2.5%), 51% said they prefer split government, meaning that both parties control one chamber of Congress each, or that control of the legislative and executive branches is split between the GOP and Dems.

Indeed, this sentiment is even stronger among Republican voters, with 32% of them saying it is better for one party to control both chambers of Congress compared to 52% of Dem-leaning voters who said they prefer unified government.

The thing with divided government is that it means that an increased number of divergent views will seek to shape the law-making process. In short, less law-making gets done. To make progress and overcome obstructionist efforts, compromise is key.

Still, with the awareness that less legislation will get passed by a divided government, voters polled by Maru still think this is the better way. Consider that 69% of those polled said that it’s more important for the new Congress to pass less legislation with bipartisan support than for one party to get more done without buy-in from the other side.

While that conciliatory sentiment might seem incongruous with what we’ve seen in US politics in recent years, it reflects the main takeaways of the recent midterm elections, when US voters mostly repudiated intransigent candidates on both sides of the aisle. Consider that 83% of polled voters said they are more likely to back a candidate who supports bipartisanship, a call backed by 79% of GOP voters and 88% of Dems. Interestingly, just 17% of those polled said they would be less likely to back a lawmaker who supports bipartisanship.

At a time when US politics is framed as a zero-sum game – with a legislative win for President Joe Biden often cast as a loss for the GOP – how then do we reconcile recent political trends with the poll’s findings? (In the GOP, for instance, lawmakers who bucked the party by speaking out against former President Donald Trump in the wake of the Jan. 6 riot on Capitol Hill were shunned.)

John Wright, Maru’s executive vice president, says that “the nature of US politics is most often the desire of opposing sides to want the other party to act in a bipartisan fashion to get things done to achieve their own ends.”

“Because of that built-in bias,” Wright explains, “the sentiment may be there for compromise, but it’s almost always a one-way street of expectation, so it rarely occurs.” Indeed, this view, whereby many lawmakers fear that compromise will lead to electoral backlash, helps explain why legislators on both sides of the aisle have doubled down on their positions on many divisive issues, like abortion, rather than seek a middle ground.

So with the 118th Congress having just been sworn in, what might we expect over the next two years? “Given the split between the House and the Senate for the next couple of years, especially with the run-up to the presidential election [in 2024], compromise may be almost impossible to find,” Wright says, suggesting that the recently passed $1.7 trillion spending bill is likely to be the last bit of compromise we see for some time.

Aging autocrats and tech bros: 2023's top risks

For Ian Bremmer, Eurasia Group's top 10 geopolitical risks of 2023 are kind of two sides of a very interesting coin. On the one hand, major democracies and their institutions look pretty stable. On the other, we've got a small number of aging autocrats and tech bros who have an incredible amount of power — and this is all playing out in Russia, China, Iran, and ... in artificial intelligence.

Interested? Watch his Quick Take here.

Hump day recommendations

Read: “All the Pretty Horses,” by Cormac McCarthy. This great American writer published two eagerly awaited new novels in recent months: “The Passenger” and “Stella Maris.” But those unfamiliar with his work should start with an early classic, “All the Pretty Horses,” the first of his “border trilogy.” This page-turner reveals a novelist who, even in his early work, was already a master of vivid character. — Willis

Watch: O Rei & Sly. The late Brazilian soccer GOAT Pelé had a very brief career as a Hollywood actor, appearing in "Victory," a feel-good 1981 film directed by the great John Huston about Allied POWs who plot an escape from Nazi-occupied Paris while playing the German national team. The Allied squad features both big-name actors such as Michael Caine and Sylvester Stallone — who plays goalkeeper — and soccer stars like Argentina's "Ozzie" Ardiles and England's Bobby Moore. The movie is just okay, but if you're a soccer fan, you'll go nuts over the final scene. — Carlos

Read: the limits of what we can know. How did the accidental invention of a pigment famously used by Van Gogh and Hokusai lead to the development of the poison gas used at Auschwitz? What devastating scientific/mathematical discovery moved Albert Einstein to protest that “God doesn’t play dice with the universe!”? And what happens when scientific inquiry reaches a point where it makes the world more uncertain rather than less? Part historical fiction, part philosophical meditation, and part quantum mechanics primer, the short, unclassifiable book “When We Cease to Understand the World” is Chilean author Benjamín Labatut’s exceptional effort to tackle these questions. If you read Spanish, pick up the original, titledUn Verdor Terrible. — Alex

Watch: “All the Beauty and the Bloodshed.” Nan Goldin, a New York-based photographer, anthropologist, and activist, has lived one hell of a life. She left a troubled suburban home as a kid and came of age professionally and sexually in New York City in the 1970s and 80s. Using her camera to document experiential art, sex, and the HIV/AIDS crisis that decimated her community, Goldin, who suffered from drug addiction in her 20s, more recently became entangled with the opioid crisis. “All the Beauty and the Bloodshed,” a documentary, elegantly interweaves the past and present and makes one nostalgic for a New York City where queer counterculture was young and free. — Gabrielle

Win a signed copy of Ian Bremmer's book

Tell your friends to sign up for Signal! If you refer at least four new subscribers, you could win a signed copy of Ian's latest book, "The Power of Crisis," recommended by Moose himself. Just copy and paste your personalized link (below) and share with your friends.

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Hard Numbers: Banksy thieves in Ukraine, red light for Pakistani malls, skull shipment from Mexico, heartwarming US-China moment

Alex Kliment

12: The ringleader behind a plot to steal a mural painted by the famous street artist Banksy in Ukraine could face up to 12 years in prison. The pseudonymous British artist stenciled the image of a woman in a gas mask on a wall in the town of Hostomel just after Russia invaded. The artwork, valued at a quarter of a million dollars, was lifted in December but has since been retrieved.

8:30: Cash-strapped Pakistan has ordered all malls and markets to close by 8:30 pm as part of a wider packet of measures to conserve energy. With a much-needed IMF loan still on hold, the country is reeling from the costs of imported fuel for power generation. Things have gotten so bad that the government has even turned off half of the country’s traffic lights just to save a few extra kilowatts.

4: Authorities at a Mexican airport found four human skulls wrapped in tinfoil in a package destined for the US state of South Carolina. No motive or explanation has yet been established, but the package was postmarked from the cartel-infested Mexican state of Michoacán, one of the most violent places on earth.

22: A thaw in US-China ties? China’s new foreign minister Qin Gang, who for more than a year served as Beijing’s top diplomat in Washington, warmly praised the US in a tweet, noting that he had traveled to 22 different US states, made “many friends,” and was “deeply impressed” with Americans.

This edition of Signal was written by Gabrielle Debinski, Alex Kliment, Carlos Santamaria, and Willis Sparks. Edited by Tracy Moran.

Today we ...

  • Follow Ukraine's president around Washington
  • Ask what China considers a COVID death
  • Ponder new Twitter leadership
  • Seize enough fentanyl to kill all Americans

Thank you for reading.

The Signalistas

Zelensky charms Washington. But will it be enough for the long haul?

Carlos Santamaria

Days after Russia invaded Ukraine on Feb. 24, Ukrainian President Volodymyr Zelensky turned down US officials who offered to get him out by famously quipping: "I need ammo, not a ride."

Almost 10 months later, he finally got both.

The US and its NATO allies have given Ukraine a lot of weapons (and cash, too). And on Wednesday, Zelensky finally took that US airlift … to make his first foreign trip since the war began to Washington, DC.

“Your money is not charity. It is an investment in global security and democracy that we handle in the most responsible way,” Zelensky said during his speech to the US Congress, which some have compared in historical significance to Winston Churchill’s after Japan's Dec. 1941 attack on Pearl Harbor.

What a whirlwind year 2022 has been for Zelensky. When Russia invaded, many in the West feared it would be a cakewalk. They also doubted Zelensky, a 44-year-old former TV comedian and novice politician, would have the chops to lead his country at war against mighty Russia and the steely Vladimir Putin.

But 300 days into the war, the Ukrainians are still, in their president's own words, "alive and kicking." They've beaten back the Russians from most of the territory they had taken — thanks to both Russian military underperformance and stronger-than-expected Ukrainian resistance. The only thing that’s worked for Russia so far is hitting energy infrastructure to leave civilians cold and dark.

None of this would have been possible without Western aid. Beyond the symbolism of going to the White House and addressing Congress, that's what Zelensky's trip is all about.

Time is of the essence. The annual spending bill unveiled by Congress on Tuesday allocated almost $45 billion for Ukraine, more than half of which will go directly to beefing up the country's military muscle to fight Russia. Meanwhile, the State Department announced that the US would for the first time send a Patriot missile defense system — which Ukraine has been demanding for months.

"If your Patriots stop the Russian terror against our cities, it will let Ukrainian patriots work to the full to defend our freedom," Zelensky, clad in his trademark olive-green army fatigues instead of a suit, told US lawmakers.

As far as the US president is concerned, America’s love for Ukraine is mutual and unwavering. “We will stay with you for as long as it takes,” Joe Biden assured Zelensky during a joint press conference.

But how long for whom? Congress is set to lock in funding until late summer, when US support for Ukraine might enter a new phase under the GOP-held House, whose likely next speaker has already signaled that he won't give Zelensky a blank check.

When it's time to top up Ukraine’s balance, the Biden administration might face a perfect storm of crises: dealing with an influx of asylum-seekers at the southern border, funding the government for the next fiscal year, raising the debt limit, and avoiding a possible recession triggered by interest rate hikes to fight inflation.

America's commitment to Ukraine "will be challenged by Republican lawmakers who see the US sending money overseas but not securing the southern border, and by Democratic lawmakers who will question why more isn't being done to fight a potential economic slowdown here," Eurasia Group's US Managing Director Jon Lieber says in this week's US Politics in 60 Seconds.

Finally, optics also matter. The same week that the boss of NATO rolled out the red carpet for Zelensky, Putin barely got a shrug from one of his few remaining allies, President Alexander Lukashenko of Belarus. Unlike Biden with Ukraine, Lukashenko has little to offer Russia beyond a photo-op and Belarus as a launchpad to attack Ukraine.

And although Putin would appreciate US Republicans doing him a favor by penny-pinching Kyiv, he can’t afford to wait that long as the war drags on and the Ukrainians build momentum on the battlefield.

"Russia may indeed have that hope but won't be able to count on it,” says Eurasia Group analyst Zach Witlin. “Ukraine support is robust so far and not showing any signs of weakening, and it will take some time before the question rises again."

Zelensky's welcome in the West reinforces message of unity

Symbolism is important.

For Ian Bremmer, Ukrainian President Volodymyr Zelensky’s trip to Washington, DC, sends strong messages to Americans, Russians, and the world. It reflects political stability in Ukraine as well as the country’s military resilience and defense. But it also showcases what the US has done in leading a strong coalition to punish the Russians and to support Ukraine.

Watch Ian’s Quick Take on Zelensky’s quick trip here.

Financing the transition to net zero

Bank of America

The transformation to a net-zero-emissions economy may be ambitious, but it is not impossible. By 2030, global investments in renewable energies must triple to $4 trillion per year.

Bank of America’s efforts in 2021 alone: $250 billion deployed to environmental finance efforts.

What We're Watching: China's COVID shenanigans, Oz olive branch, Peru vs. Mexico, Twitter succession

Willis Sparks

Counting China’s COVID deaths

In recent weeks, China has announced an abrupt about-face on its zero-COVID policy, which imposed tough (and economically costly) restrictions on freedom of movement inside China for the past three years. Despite predictions that a sudden end to existing COVID rules could contribute to one million deaths, the state has lifted lockdowns, ended many testing and quarantine requirements, and halted contact-tracing systems. For a government that works hard to persuade its people that it protected them from the COVID carnage in Western democracies, it’s a big risk. How to keep the number of COVID deaths down? Just redefine what counts as a COVID death. Going forward, only those with COVID who die of pneumonia or respiratory failure will be counted as COVID fatalities. (The US counts any death to which the virus contributed as a COVID death.) China’s change will make it much harder for Chinese health officials to properly allocate resources to respond to COVID spikes, and more infections will create mutations that generate new variants that cross borders. Officials in many countries, including the US, have argued over how to define a COVID death, but the question is especially sensitive in an under-vaccinated country of 1.4 billion people.

Australia tries to repair China trade ties

“Australia’s approach is to cooperate where we can, disagree where we must and engage in the national interest,” Australia’s Foreign Minister Penny Wong said before touching down in Beijing for a meeting on Wednesday with her Chinese counterpart Wang Yi. It’s the first time a high-ranking Australian official has visited the mainland since 2019 due to extremely tense bilateral relations. Wong reiterated that the meeting itself was a triumph given that diplomatic ties were all but frozen until new Aussie PM Anthony Albanese was elected in May, promising to reestablish dialogue with China. While no major public breakthroughs were announced on trade impediments, Beijing and Canberra vowed to establish a consistent high-level dialogue. Why has the mood been so grim? Well, President Xi Jinping is especially peeved at Canberra for joining US efforts to build a bulwark against China in the Asia Pacific by joining alliances including the Quad and AUKUS. Things got particularly bad in 2020 when Australia backed calls for an international investigation into the origins of COVID-19, prompting Beijing to impose devastating tariffs and bans on Australian exports. The Albanese government is keen to fix that, given that key Aussie exports – like wine – have plunged due to Chinese tariffs.

Peru clashes with Mexico as political crisis deepens

Peru has ordered the Mexican ambassador to leave the country after Mexico City granted asylum to the family of former leftist President Pedro Castillo, who was recently arrested for trying to dissolve Congress and stage a coup. Simply put: Peru is a hot mess. Castillo, a former rural school teacher with no prior political experience, was accused of corruption and ineptitude and faced multiple impeachments during his year and a half in office. Castillo's wife is also being investigated for partaking in alleged corrupt activities. Peru’s government, now led by Dina Boluarte, recently declared a state of emergency to manage mounting social unrest that’s led to at least 26 deaths. Crucially, Mexico isn’t the only state criticizing Lima. Fellow leftist regimes in Argentina, Colombia, and Bolivia released a joint statement expressing concern over Castillo’s “undemocratic harassment.” Meanwhile, Peruvians continue to protest, with some calling for new elections and others demanding Castillo be released. While Peru’s Congress is set to greenlight early elections, they wouldn’t take place until April 2024. That’s unlikely to placate the angry masses.

What We're Ignoring: Whoever becomes the new Twitter boss

After 57.5% of Twitter users voted for him to step down as CEO in an online poll, Elon Musk now says he'll do it ... once he finds the right person to replace him. Hmmm. But even if he does, any incoming Twitter boss won't have as much free rein over the social platform as its mega-rich owner, who still plans to run the tech side. More importantly, why drop $44 billion on buying Twitter to let someone else call the shots? The poll result likely gave Musk the perfect excuse to get out but still do whatever he wants by pulling the strings behind the scenes so he won't face so much blowback. The problem is that whoever steps into his shoes, none of the Twitter fights that Musk has started over hate speech moderation or who gets verified will likely be resolved anytime soon. Unless, of course, the new CEO is Snoop Dogg, who clearly wants the job and would certainly make Twitter anything but boring.

Win a signed copy of Ian Bremmer's book

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Hard Numbers: Fentanyl record in the US, Rohingya refugees stranded, “bomb cyclone” steals Christmas, meet Israel’s new government, SBF pals plead guilty

Gabrielle Debinski

10,000: The fentanyl crisis in the United States is out of control. The Drug Enforcement Administration said it seized more than 10,000 pounds of the deadly stuff this year, double that of 2021. Federal agents say that’s enough to kill every single American.

160: At least 160 Rohingya refugees are stranded in a rickety boat in waters near the Andaman Islands, an Indian territory, having fled horrid conditions at a refugee camp in Bangladesh. Indian vessels have reportedly approached the boat that was aiming for Malaysia but have so far not helped the stranded people disembark.

50: Nearly 50 million Americans are under winter weather storm warnings as a “bomb cyclone” is expected to hit the midwest and northeast just as millions of people are preparing to travel for the holidays. Some airlines are offering travelers payouts to avoid the airport madness and ditch their flights … and miss Christmas with their families. Good deal or bad deal?

63: After his party won the most votes in last month’s general election, Israel’s comeback kid Benjamin Netanyahu announced that he’s formed a new government – the most right-wing in Israel’s history. This comes as a bill advanced through the Knesset on Wednesday – with 63 votes in favor, 53 opposed – that would make the police commissioner “subordinate” to the incoming (extreme right) Minister of National Security Itamar Ben-Gvir.

2: Two of now-disgraced FTX founder Sam Bankman-Fried’s associates pleaded guilty to fraud and will cooperate with US prosecutors investigating the collapse of the bankrupt crypto exchange fund. SBF himself was extradited from the Bahamas to New York and is scheduled to appear before a Manhattan judge on Thursday to face criminal charges.

This edition of Signal was written by Gabrielle Debinski, Carlos Santamaria, and Willis Sparks. Edited by Tracy Moran.

Can you get by with a little help from your friends?

In recent years global supply chains have gotten badly kinked by resurgent protectionism, the economic havoc of the pandemic, deepening rifts between the US and authoritarian countries, and the war in Ukraine. The result is inflation levels not seen in advanced economies since the 1980s and a food security crisis of global proportions.

In this special edition of Signal, we’ll ask what comes next by surveying the scarcities, tracking the travails of truckers, scarfing down a handful of (micro)chips, and asking whether “friends” can really save the day. Enjoy!

- The Signal Team

Can you get by with a little help from your friends?

Illustration of supply chains: airplane, cargo ship, motorcycle, trucksAlex Kliment

The pandemic inflicted a huge shock on supply chains, but there is another force at work remapping global trade flows too: the deepening ideological divide between the US and China, framed in Washington as a broader competition between democracies and autocracies.

The so-called “de-coupling” between the world’s two largest economies began during the presidency of Donald Trump, who slapped tariffs on China in a largely unsuccessful attempt to address the real harms that offshoring has done to some US workers.

But now, as global trade reorients itself in the wake of the pandemic, Washington is making a broader push for US companies to source their goods from factories in friendly democracies rather than authoritarian countries — China, Russia, and the gang — that could use their control over key materials or products to inflict pain on the West. Russia’s use of oil and gas to pressure Europe is one clear example, of course, but there are others: China’s monopoly on the production of rare earths used for electronics, or the precarious concentration of global microchip production in Taiwan, which lives under the constant threat of Chinese invasion.

US Treasury Secretary Janet Yellen recently touted the benefits of so-called “friendshoring” on a visit to South Korea, which is trying to lure American supply chains away from China and to start making more microchips itself. Southeast Asian manufacturing powerhouses like Malaysia, Vietnam, Thailand, and Indonesia are also keen to continue capitalizing as “friends” of the US.

Friendshoring may offer certain protections in a world of deepening ideological competition, but there are tradeoffs: “friendly” countries may not always produce goods as cheaply or efficiently, meaning that consumers may have to accept higher prices, particularly in the short term. Is the tradeoff of greater security in exchange for less efficiency worth it? More to the point, is it now unavoidable?

Shortages reach far beyond food

Willis Sparks

The war in Ukraine is just the latest crisis to befall global supply chains in recent years, and it appears likely to get worse before it finally eases. It’s not just about interrupted flows, shortages, and higher prices for food and fuel. According to a report published in May 2022 by Dun & Bradstreet, a total of at least 615,000 businesses operating globally depend on supplies from either Russia or Ukraine. About 90% of those firms are based in the United States, but supply chains in Europe, China, Canada, Australia, and Brazil are heavily impacted. According to the report, a total of 25 countries have a high dependency on Russia and Ukraine for a variety of commodities.

Five months into the war, it’s clear that the likeliest outcome of the current fighting will be a long-term stalemate. Russia doesn’t appear militarily strong enough to take and hold all of Ukraine, and Ukraine doesn’t appear strong enough to drive Russian troops completely off Ukrainian land. As a result, those who depend on resources and production inputs from Russia and Ukraine now know they’ll likely need to invest in new suppliers of hundreds of different commodities and products – from sunflower seeds to turbojets – to build better resilience into their supply chains, rather than simply waiting for the fighting to end.

CIO Strategy Webcast Series

Citi Private Bank

Join us each week on Thursday at 11:30 am EST for a conversation with senior investment professionals and external thought leaders on timely market events and ask your most pressing questions.

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The Graphic Truth

Luisa Vieira

The pandemic sent global supply chains into a tizzy. Then, just as economies were embarking on their post-COVID economic recoveries, Russia invaded Ukraine, upending the global grain trade and sending supply chains spiraling further. Supply chain frictions have a lot of unintended consequences: Brexit-related supply chain issues made it hard for some Brits to get their hands on a pint of beer, while China’s punitive zero-COVID policy drove the auto industry – among others – into a full-blown crisis. We take a look at the Global Supply Chain Index from 2000-2022 along with key global economic milestones.

What We're Watching: Truckers wanted & not-so-cheap chips

Gabrielle Debinski

Where are all the truck drivers?

The global truck driver shortage has been disrupting already-out-of-whack supply chains, particularly in the US, the European Union, and Britain – further complicating their post-pandemic economic recoveries. Last year, the American Truckers Association said it was around 80,000 drivers short, while in Europe, a deficit of 40,000 truckers has contributed to long waits and empty shelves. What’s going on? The pandemic has upended the way we work. Trucking is an arduous and ungratifying gig: Drivers often spend days or weeks far away from home, and they don’t get paid for hours spent waiting for goods to be loaded and unloaded. The road can be grueling, the compensation is underwhelming, and the benefits are often … nonexistent. In the US, trucking salaries have plunged in recent decades. Median wages for truck drivers in 1980 were about $110,000 annually (adjusted for inflation); in 2020, they were just $47,130. Unsurprisingly, many truckers are opting for jobs with better conditions and pay, so trucking firms in Europe and the US are struggling to lure drivers back to work and recruit new staff. It’s particularly grim in the UK, where supply-side frictions have been exacerbated by Brexit. In the US, meanwhile, companies like Walmart are fighting back by offering massive salary hikes to attract truck drivers. Will it get the wheels turning?

Chipping away at supply chains

The US Congress this week passed the behemoth Chips and Science Act, which ponies up $52 billion in subsidies and incentives to boost domestic production of semiconductors, the invisibly thin microchips that are essential for everything from phones, cars, and factories, to fighter jets, cruise missiles, and artificial intelligence. With the bill, Congress is making a big move in a new global “Chips race” for dominance of the industry: the EU is now spending close to $50 billion on the same thing, and China, which still depends on the US and its allies for inputs into its home-grown chips, has poured hundreds of billions into someday becoming a semiconductor superpower itself. For all three of the world’s largest economies, the concern is the same: the semiconductor market is highly concentrated, particularly in Taiwan, which produces more than 60% of the world’s chips. That’s a problem commercially – in 2021, there was a global shortage after tech firms gobbled up the entire supply, leaving automakers scrambling for chips. But it’s also a problem geopolitically. China doesn’t want to be dependent on chips from a Taiwan that’s allied with the US, while the US and EU don’t want to rely on a Taiwan that could be taken over by China any year now. Critics of the Chips act say its a sop to powerful tech companies that can well afford to build their own factories, and there are questions about whether the money will be spent on the right things: making the chips is one thing, cutting edge R&D is a whole other bowl of chips, and the supply chain for a single chip can pass through many countries before final assembly. As a cautionary tale: the EU aimed in 2013 to double its share of global semiconductor production to 20% by 2020. It didn’t work.

Future-proofing: How we fix broken supply chains

“Envision supply chains like a strand of Christmas lights. If one light goes out, then the whole strand will stop working.” So says Eurasia Group’s Christina Huguet on the latest episode of the Living Beyond Borders podcast, which focuses on the moments those lights went out: when the pandemic hit shipping, manufacturing, and labor all at once. Huguet, along with moderator Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, and David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth, look at what it will take more than two years later to turn those lights back on and create more resilient global supply chains.

Listen here.

Hard Numbers: The scarcity edition

Gabrielle Debinski

2 million: As the war in Ukraine rages on, the African continent is facing a shortfall of around 2 million metric tons of fertilizer that’s causing an unprecedented loss in food production throughout the continent. A Senegalese official warned at a recent G20 meeting that starvation could kill more Africans than COVID-19.

10: American women are the latest victims of the supply chain crunch. Tampon shortages as a result of staffing issues at manufacturing plants, transportation disruptions, and the scarcity of materials like cotton caused tampon prices to soar almost 10% in the US in recent months.

50: Europe’s largest paper packaging company, Smurfit Kappa, recorded a whopping 50% increase in core profit during the first half of this year as a result of surging pandemic-related demand. Still, the company says it’s preparing for paper shortages across the continent in the months ahead as a result of mandatory gas rationing as EU states try to reduce their dependence on Russian natural gas.

10: Several Polish supermarkets are limiting sugar purchases to 10 kilograms per person after consumers cleared out shelves fearing further price hikes and scarcity of the sweet staple. Poland, one of Europe’s biggest sugar producers with ample supply of the stuff, recently recorded its highest inflation rate in 25 years.

This edition of Signal was written by Beatrice Catena, Gabrielle Debinski, Alex Kliment, Carlos Santamaria, and Willis Sparks. Edited by Tracy Moran. Graphic by Luisa Vieria. Art by Paige Fusco.

Resilience in an era of crisis
Willis Sparks

In a special Sunday edition of Signal, we take stock of the geopolitical situation halfway through one of the most tumultuous years in recent memory. Russia’s invasion of Ukraine boosted Euro-Atlantic unity but deepened fault lines between the “West” and powerful emerging markets. A global food crisis still looms, and later this year we’ll see pivotal and extremely contentious elections in Brazil and the United States.

If the last six months are any indication, you’ll want to buckle up for the second half of the year.

-The Signal team

Resilience in an era of crisis

Willis Sparks

We live in an era of emergency. Since 2008, we’ve seen a global financial crisis, a sovereign debt crisis in Europe, and a wave of unrest that sparked political turmoil across North Africa and the Middle East. Civil wars in Syria and Libya helped trigger a migrant crisis that upended European politics. Then came Britain’s exit from the EU, the surprise election of a US president who upended the most basic assumptions about America’s role in the post-war world, and a political crisis in the wake of his defeat. Next came a global pandemic that has killed millions and continues to inflict human, economic, and political damage in every region of the world. Now we have Russia’s war on Ukraine, millions more refugees, and a global food emergency that has only just begun. All of that has happened in the past 14 years.

Given all that, it’s obvious that deeper investment is needed in resilience at every level of government, commerce, and society. In a world of shocks, we need good shock absorbers. Political and business leaders now face a basic choice. They can build networks of trade and political alliances with only like-minded partners – those with similar political systems, cultures, or overlapping interests – to ensure competitors and potential enemies can’t gain strategic advantages by exploiting weaknesses like monopolies on needed resources or supply-chain vulnerabilities. Or they can diversify their partnerships to build relationships where they make the most sense for economic value and the common good. It’s possible that governments will now use sanctions, tariffs, export bans, subsidies, and other forms of protectionism as everyday weapons to build resilience by enhancing security. Others will continue to seek resilience through a broader diversification of their partnerships.

This choice will be most obvious in relations between China and the West. Will the US and EU begin to treat China primarily as a political and economic opportunity or mainly as a security risk? Will China seek a more confrontational role toward the West and the international institutions where it has outsized power, or will it continue to define its security through the dynamism of its global trade and investment relationships?

These are the questions most likely to determine how well the global economy and current international system absorb the next generation of shocks.

The Graphic Truth

Beatrice Catena

Prices at the pump are soaring. Since Russia’s invasion of Ukraine, much of the world has been affected by the economic impact of sanctions, higher inflation, constrained supply, and overall uncertainty. In the G20 economies, consumers tend to complain most about the price of unleaded gas, which is affecting their ability to get around town and go on holiday. We look at how far north the G20’s gas prices have been driven.

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Register now.

Big bad bear market

Carlos Santamaria

If you're an American worker with a 401(k), you're probably worried about being in the claws of a certain furry animal everyone seems to be talking about these days.

We're referring to a bear market, a Wall Street term for when the value of stock indices like the Dow Jones Industrial or the S&P 500 fall under 20% or more from a recent peak for a sustained period of time. Since bears hibernate, it’s investor-speak for a market in retreat.

On June 13, the S&P 500 officially entered bear market territory — with big implications for both investors and people who are indirect participants in the stock market through their 401(k), America's most popular company-sponsored retirement account. Simply put, since your 401(k) is likely invested in stocks, the longer the current slump lasts, the less money you'll have for retirement.

But that's only true if the bear market is still ongoing when you retire.

In other words, if you can afford to wait it out, odds are that the bear will eventually be followed by a bull (market) — aka a cycle of expansion — once the current economic turmoil subsides. Still, you might have a problem if you're a baby boomer with only a few years left to reach retirement age, in which case you'll have to crunch the numbers to decide whether it's best to cash out now — with less money, and pay taxes on what you withdraw — or pin your hopes on a swift recovery.

The thing is, no one knows how long bear markets last. The average historical duration is about a year, but in the early 1970s the bear stayed in its cave for almost two years, the S&P 500 lost half its value, and the US economy took a whopping 69 months to completely recover.

During the 2007-2008 Great Recession, the S&P 500 decline was even sharper (57%) and the market only recovered after 49 months.

Will the bear be followed by an even scarier recession? Maybe, but it's not guaranteed.

One key difference between the current US bear market and previous ones that preceded recessions is that unemployment is still very low at 3.6%. When Americans start losing their jobs at a higher rate, though, that's likely a sign that a recession is on the way.

What’s more, with the Fed getting tough on interest rates to tame sky-high inflation, it’s certainly possible that the US economy won’t hit the Goldilocks “soft landing” of bringing inflation down to about 2% while avoiding a recession (two consecutive quarters of negative GDP growth).

Regardless, “making any prediction is unusually fraught” now due to an unprecedented set of shocks, including COVID and the war in Ukraine, says Robert Kahn, Eurasia Group's director of Global Macro-Geoeconomics.

Still, he adds, a recession seems more likely than not. It'll be painful, but not necessarily a catastrophe.

“Recessions can be moderate in tone,” Kahn explains. And whether or not we get one, “we’re going to have tremendous uncertainty heading into this slowdown period about how that plays out.”

What We’re Watching: US and China's rocky marriage and India’s unlikely success

China-US: Bad politics, good economics

President Joe Biden is a very different president than his predecessor, Donald Trump. But on some foreign policy issues – notably managing relations with China – the two are kindred spirits. US-China relations crashed under Trump, and Biden has kept the relationship on a mostly combative footing, leaving Trump-era tariffs on some Chinese goods in place. Still, while the White House talks tough about isolating China geopolitically, speculation of a US-China “decoupling” is misplaced. Beijing and Washington need each other because their economies are closely intertwined. The US is China’s biggest trading partner, with Americans importing a whopping $541.5 billion worth of Chinese imports in 2021. Even in 2020 – a slower trading year amid the pandemic – China and the US traded $559.2 billion worth of goods. What’s more, two-way foreign direct investment, which is more resistant to economic shocks, has ballooned in recent years (Chinese FDI in the US increased 61% between 2015 and 2020). The resilience of the bilateral economic relationship is also reflected in the fact that China is the third-largest export market for American goods (behind Mexico and Canada). Support for a tough-on-China stance gets rare bipartisan support in Washington these days, so political ties between Beijing and Washington will likely remain rocky. Still, with their economic fortunes so closely linked, China and the US are in this marriage for the long haul.

How is India doing so well?

On the surface, India seems to be having a moment. With record-breaking monthly exports and a post-pandemic bounce-back of 8.7% GDP growth pushing the size of its economy to $3.3 trillion, Prime Minister Narendra Modi seems well on his way to meeting his goal of making the country a $5 trillion economy before long. Meanwhile, both Russia and the West are courting Delhi as a key ally these days. But beneath the surface, not all is well. Despite Modi’s ambitious economic reforms, inequality remains stubbornly high, and the war in Ukraine has worsened inflation. Unemployment, meanwhile, is at 7.8%. In a country with 360 million people under age 15, that’s a big long-term problem. Meanwhile, Modi’s move to ban wheat exports has angered its Western partners, while the anti-Muslim bent of Modi’s ruling BJP party has antagonized Delhi’s Gulf partners. And of course relations with China, the other billion-strong Asian heavyweight, are strained. Modi looks secure at home, with no real opposition and a compliant media, but things aren’t getting easier for the world’s most populous democracy.

​Podcast: Could today’s crisis lead to future growth?

If you’re peeking out from under the duvet, wondering how to make it to 2023, be sure to listen up. In our latest “Living Beyond Borders” podcast from Citi Private Bank and GZERO Media, we examine the global risks setting the world on edge at the halfway point of 2022.

New COVID strains, supply chain issues, Russia’s war in Ukraine, climate change, soaring inflation, geopolitical decouplings — these are just a handful of the bubbling crises roiling the markets and the international order.

To delve into what’s happening in the markets and the future of financial growth and globalization, Eurasia Group’s Managing Director for Climate and Sustainability Shari Friedman speaks with David Bailin, chief investment officer and global head of investments at Citi Global Wealth, and Ian Bremmer, president of Eurasia Group and GZERO Media. Listen to their discussion here.

Hard Numbers: Global malnutrition alert, Europeans’ bleak view of economy, South Korea’s export crunch, Xi’s confidence

Gabrielle Debinski

8 million: Global food prices have risen amid the war in Ukraine, but it is particularly bad for emerging-market economies. UNICEF now says that up to 8 million children under the age of 5 could die from severe malnutrition in the coming months. The organization listed nearly two dozen “high risk” countries and urged developed states to step up and help.

-23.6: European confidence in the economy is going from bad to worse. The EU’s consumer confidence indicator for the eurozone plunged to -23.6 this month, the lowest it’s been since the peak of the pandemic in April 2020. Fears are mounting that the continent will soon fall into a recession as Russia tightens its grip on gas exports.

13: South Korean exports in the first 10 days of this month dropped 13% from the same period in 2021, a dramatic change from earlier this year when the country experienced an export boom amid the global post-pandemic recovery. The shift highlights the ongoing challenge for export-reliant economies amid the global inflation storm.

5.5: China’s economy has been pummeled by Beijing’s strict zero-COVID policy and a weakening housing market. But President Xi Jinping says his country is still on track to meet its 5.5% GDP growth goal this year. Economists, however, are skeptical and suggest it will be closer to 4%.

This edition of Signal was written by Beatrice Catena, Gabrielle Debinski, Alex Kliment, Willis Sparks, and Carlos Santamaria. Edited by Tracy Moran. Graphic by Ari Winkleman, art by Paige Fusco.

A boy drinks from a water pump in a village outside Sanaa, Yemen.
REUTERS/Khaled Abdullah

Today, in a special edition of Signal, we look at how water scarcity is driving both conflict and progress. In the end, is the glass half empty or half full?

This edition is part of the “Living Beyond Borders” series presented by GZERO and Citi Private Bank.

Thank you for reading. Please tell your friends to subscribe here.

- The Signal team

An increasingly thirsty planet

A boy drinks from a water pump in a village outside Sanaa, Yemen.

REUTERS/Khaled Abdullah

The amount of water on Earth has been more or less the same for the past 4.5 billion years. But today, a growing number of the world’s people don’t have access to enough of it. In fact, nearly half of the world's population lives in places that face water scarcity for at least one month every year. And more than 1.2 billion people lack regular access to clean water altogether.

For many of them, the situation is getting worse by the day, as climate change causes more frequent droughts or conflicts prevent people from getting to freshwater sources. The lack of access to clean water for drinking, cooking, and crops can cause illness, starvation, and death.

Small wonder, then, that water scarcity is one factor behind some of the world’s most intractable conflicts: Israel-Palestine, India-Pakistan, and now Russia-Ukraine.

The desperate search for water also has millions on the move. The UN warns that water scarcity could force some 700 million people from their homes in the coming years, in mass migrations that will test governments, humanitarian organizations, and societies alike.

But it’s not all parched earth, thirst, and conflict. Water scarcity can also give rise to spectacular practical and technological innovations, as the examples of water management in the arid landscapes of Israel, Nevada, and South Africa show.

In this special edition of Signal, we’ll look at how the world is coping with water scarcity and what’s at stake for an increasingly thirsty planet.

What We’re Watching: Water wars vs. cooperation

Gabrielle Debinski

Water wars?

Hundreds of millions of both Indians and Pakistanis depend on water from the Indus River for drinking, farming, and hydropower. The Indus Waters Treaty, signed by India’s prime minister and Pakistan’s president in 1960, guarantees how water from the river and its tributaries will be shared. This was put at risk in February 2019, when a suicide car bomb killed more than 40 Indian soldiers in the Indian-controlled sector of Kashmir. India’s transport minister responded with plans to “stop our share of water which used to flow to Pakistan.” The Pakistani government then warned it would treat any stoppage of water as an “act of war.” A treaty loses its values if one side decides not to honor it. Though tensions cooled in this case, the risk of a water war remains, because it’s simply too dangerous for these nuclear-armed and bitter rivals to fight a war with conventional weapons, and water will only become a more precious resource in coming years. Global warming could shrink the Himalayan glaciers that feed the river by more than a third in coming decades and make rainfall patterns more erratic, even as Indian and Pakistan water demand increases with population growth.

India and Pakistan are not the only rivals to successfully share water despite bitter differences on other questions. The five former Soviet Republics in Central Asia have not fought over access to the Aral Sea. Jordan and Israel haven’t waged war over the waters of the Jordan River. Threats over access to the Nile have not yet provoked war among Ethiopia, Sudan, and Egypt. A dispute over the Mekong River between China and its Southeast Asian neighbors has generated tensions but not widespread violence. Turkey and Armenia, neighbors with no diplomatic relations who have argued for decades over charges of genocide, have continued to share water from the Arpacay River, which forms the border between them. The two countries continued to honor the Soviet-era treaty that set water-use terms even while the two have fought on opposing sides of a war in 2020.

But successfully managed disputes of the past don’t guarantee a peaceful future, so these and other potential water-based confrontations are worth watching.

Can water cooperation bring peace to the Middle East?

Water scarcity is one of the biggest crises emanating from climate change. If current trends continue, the UN warns that 5 billion people — more than two-thirds of the global population — could be living in areas grappling with extreme water scarcity by 2050. Long dealing with irregular rainfall, increasingly arid conditions, and a growing population, Israel has emerged as a global leader in clean water solutions. Israel, a tech hub, recognized early the importance of treating wastewater to meet growing domestic needs and to leverage it as a tool for international cooperation. In 2000, Israel, which straddles the Sea of Galilee and the extremely salty (and undrinkable) Dead Sea, revamped its water management system by building a slew of desalination plants. It has also revolutionized water recycling, treating wastewater effluent to make the liquid ready for human consumption and irrigation. The country currently recycles about 86% of water, using much of it for agricultural purposes in the arid Negev Desert.

This innovation has also presented opportunities for “drought diplomacy.” Last year, Israel and Jordan, who have long enjoyed a frosty peace, outlined a water-for-energy deal that will see Amman exchange solar energy capacity for much-needed desalinated water. Meanwhile, Israel has also partnered with Arab states, Egypt, and Bahrain on water-management approaches and equipment to mitigate shortages at home.

Innovative solutions to water scarcity problems can be found globally. The US state of Nevada recently inked a deal with California’s government, whereby Nevada will dole out cash to help the Golden State develop new water treatment facilities in exchange for increased access to Lake Mead. Similarly, drought-stricken South Africa, once facing Day Zero – whereby taps were slated to be turned off in major cities like Cape Town because of water shortages – has successfully found a slate of tech-based solutions, particularly for the robust agriculture sector.

CIO Strategy Webcast Series

Citi Private Bank

Join us each week on Thursday at 11:30 am EDT for a conversation with senior investment professionals and external thought leaders on timely market events and ask your most pressing questions.

Register now.

The Graphic Truth

Gabrielle Debinski

In many low- and middle-income countries, the availability of safe, drinkable water remains scarce. Though access has improved significantly in many places over the past two decades — by 152% in Afghanistan, for instance — the very low baseline means that still only 28% of that population has access to high-quality drinking water. Meanwhile, countries like the Central African Republic, Zambia, Nepal, and Pakistan saw their access reduced over the past two decades. Here’s a snapshot of the relative change in access to safe drinking water around the world from 2000 to 2020.

​Podcast: Saving the world’s water supply

In our latest “Living Beyond Borders” podcast from Citi Private Bank and GZERO Media, we examine the global risks related to the depletion of a vital ingredient needed for everything in life: water.

Severe weather events and climate change are causing an urgent water crisis. By changing our natural world, through both big and small disasters, water scarcity is disastrously on the rise worldwide.

To delve into this immediate threat, Eurasia Group’s Director of Energy, Climate & Resources Mikaela McQuade talks to Franck Gbaguidi, senior analyst of energy, climate & resources at Eurasia Group, and Harlin Singh, global head of sustainable investing at Citi Global Wealth.

Listen to their discussion here.

Hard Numbers: India’s record drought, privatized waterways, dripping wet smartphones, big oil meets little water

Carlos Santamaria

669: Already sweltering amid a heatwave, the capital of India now faces water shortages with the level at Delhi's biggest reservoir dropping to 669 feet, a record low. The city’s government, run by the anti-corruption AAP party, accuses the BJP-ruled Haryana state of deliberately withholding water from the Yamuna River, which it denies.

454 billion: Private corporations control 454 billion cubic meters of water around the world, about 5% of the global supply. This water-grabbing is a major problem in Africa, where China, India, Saudi Arabia, and the UAE are investing big in water-intensive agriculture projects.

3,190: That smartphone in your hand is soaking wet – maybe (hopefully!) not literally, but it took 3,190 gallons of water to manufacture it. The production of chips and semiconductors – which are what make smartphones smart – is one of the world’s most water-intensive industries.

15.5 billion: Global fossil fuel, electric, and mining companies stand to lose up to $15.5 billion in the coming years due to water scarcity, according to a new report. Projects at high risk include the Keystone oil pipeline in Canada, the Pascua-Lama gold mine on the Chile-Argentina border, the Carmichael coal mine in Australia, and the Oyster Creek nuclear facility in the US.

This edition of Signal was written by Gabrielle Debinski, Alex Kliment, Carlos Santamaria, and Willis Sparks. Edited by Tracy Moran. Graphic by Ari Winkleman. Art by Luisa Vieira.

If the economy is so good, why does it seem so bad?

In this special edition of Signal, we look at how the global economy is really doing, the inflationary pressures from Russia’s war in Ukraine, how developing countries are bearing the brunt, and how fried chicken is helping the Japanese yen. This edition is part of the “Living Beyond Borders” series, presented by GZERO and Citi Private Bank.

Thank you for reading. Please tell your friends to subscribe here.

- The Signal team

Read moreShow less

Today, we’ll bring you new angles on Russia’s invasion of Ukraine, track the war’s impact on election-year politics in France, Hungary, Brazil, and the US, and walk to the brink with Pakistan’s Imran Khan.

We’ve also got your Hump Day recs! Thank you very much for reading Signal. Please tell your friends to sign up here.

Willis Sparks

What We're Watching: Ukraine war bulletin, Hong Kong vs COVID, Pakistan's PM on the ropes

Carlos Santamaria

Oil ban, Churchill, Polish MiGs, Putin's fixes

Biden bans Russian oil, alone. The US president banned imports of Russian oil on Tuesday in a bid to increase economic pressure on the Kremlin. It’s not clear how effective this will be, given that the US accounts for less than 10% of Russia’s daily exports. Meanwhile, Europe, which slurps up almost half of those exports, has refused to join the oil ban for now, and there is virtually no chance of major customers like China or India turning down Russian crude. Meanwhile, Biden’s move carries political risks at home, as average national gas prices have already hit a record high of $4.17 per gallon. Taking more oil off the market could push prices even higher. As we head toward the midterms, how much economic pain will Americans take on behalf of Ukraine?

Zelensky plays Churchill. In a video address to a packed House of Commons on Tuesday, Ukraine’s embattled President Volodymyr Zelensky invoked two famous English wordsmiths — William Shakespeare and Winston Churchill — in an impassioned plea for more sanctions against Russia and the imposition of a no-fly zone over Ukraine. “We will fight in the forests, in the fields, on the shores, in the streets,” he said, adapting Churchill’s Dunkirk speech to his own country’s struggle against the Russian war machine. Zelensky received a standing ovation, but there is still little appetite among Western countries to risk direct combat with Russia by enforcing a no-fly zone.

Poland pledges jets to Ukraine … sort of. Warsaw has been firm that it won't transfer any of its MiG-29 jets to Ukraine directly, but it pledged on Tuesday to put them all at Washington’s disposal for onward transfer to Kyiv if America so chooses. US officials said, however, that the offer was likely untenable, citing logistical concerns and questioning the rationale. Ukrainians want the Polish MiGs because they are based on Soviet-era planes that Ukrainian pilots are familiar with and will thus require minimal training.

Putin tries to blunt the pain. With sanctions increasing and Western firms exiting from Russia, Putin on Tuesday signed a package of economic support measures for Russian people and businesses. The package boosts benefits for pensioners, slashes red tape for businesses, and eases the import and purchase of pharmaceuticals. Over the past two weeks, the Russian ruble has lost nearly a third of its value against the dollar amid the worst economic crisis Russians have faced in a generation.

Pakistani PM in trouble

Pakistan’s embattled Prime Minister Imran Khan will soon face a no-confidence vote. A motion was filed on Tuesday by 100 opposition lawmakers who blame him for the country’s ailing economy and high inflation. After the motion was accepted, opposition supporters took to the streets of the capital, Islamabad, and other cities to demand Khan step down within 24 hours. Khan, for his part, remained defiant, insisting that he'll survive all attempts to unseat him — as he did exactly one year ago. To stay in power, Khan needs 172 votes in the 342-seat assembly, where the ruling Tehreek-e-Insaf Party and its allies have a slim majority. However, eight members of Khan's party have threatened to withdraw their support, so the PM is on very shaky ground. The no-confidence vote could take weeks to schedule. Meanwhile, all eyes will be on Pakistan’s powerful army, which officially says it stays out of politics but has a long history of doing the opposite in the nuclear-armed nation.

Hong Kong’s COVID apocalypse

Two years in, Hong Kong now has the world’s highest daily per capita death rate from the COVID-19 virus. The 7.5-million-strong city-state has closely followed China’s zero-COVID policy and shunned mRNA vaccines, which means few people were exposed to the virus and developed antibodies before the latest variant hit. The COVID crisis has already delayed Hong Kong’s chief executive “election” by six weeks. Carrie Lam — the current leader, who has yet to say whether she’ll run for reelection — initially wanted to test the entire population, but powerful business leaders pushed back amid fears of a total lockdown. Hong Kong must now decide whether to relax its zero-COVID approach despite rising deaths, or risk more businesses relocating to its longtime competitor Singapore.

The Graphic Truth

Carlos Santamaria

The Biden administration on Tuesday banned US oil imports from Russia to punish its invasion of Ukraine. Although the US — the world's second-largest producer of crude — is a net exporter of black gold and far less dependent on Russian oil than European countries, the move will likely still hurt Americans via higher gas prices until other US oil suppliers ramp up production to fill the void. We take a look at where the US buys its crude from.

Putin invades the year’s big elections

Willis Sparks

Russia’s invasion of Ukraine is shifting politics inside every major country in the world. Here are four countries holding big elections this year — with details on how Vladimir Putin’s war is making a difference in Hungary, France, Brazil, and the United States.

Hungary — parliamentary elections on April 3

No EU head of government has friendlier ties with Putin than Hungary’s Prime Minister Viktor Orbán. But Russia’s invasion, says Mujtaba Rahman, head of Eurasia Group’s Europe desk, “is politically problematic for Orbán because it rekindles memories of the 1956 Soviet invasion for both pro- and anti-Orbán voters.” On the eve of what’s expected to be a close election, Hungary’s prime minister has had to strike a delicate balance on the war.

On the one hand, despite Hungary’s energy dependence on Russia, Orbán decided quickly after the invasion to back EU sanctions on Russia. On the other, fear of losing crucial pro-Russia voters to far-right election rivals encouraged him to oppose some EU plans, such as shipments of European weapons to Ukraine’s army.

In the end, Orbán’s dexterity in managing this crisis may boost his party’s chances next month.

France — presidential election on April 10 and April 24

Putin has done France’s President Emmanuel Macron an enormous favor. By starting a war during France’s six-month presidency of the Council of the European Union, he’s handed Macron the chance to play crucial European statesman rather than presidential candidate urgently hustling for votes.

The war has also sucked oxygen from the campaign of his rival, far-right favorite Marine Le Pen, who has “an embarrassing history of admiration for Vladimir Putin,” according to Rahman. In fact, her party courted controversy by borrowing money from a Russian-owned bank in 2014, when the National Rally Party was opposing Western sanctions against Russia over its seizure of Crimea.

Macron has now become a strong favorite to win a second-round victory on April 24.

Brazil — general election on October 2

Further afield, the war in Ukraine creates risks for Brazil’s President Jair Bolsonaro. Problem one is that he made a considerable show of visiting Putin in Moscow just days before the invasion to express “solidarity with Russia.” For some Brazilian voters, that’s an embarrassing reminder of Bolsonaro’s own controversial military background and hyper-macho political rhetoric. After the invasion, the president insisted that Brazil would remain “neutral,” alienating some voters on both sides.

But the Russian invasion’s biggest impact on Brazilian politics this year will be economic. In presidential polls, Bolsonaro now trails his main rival, former president Luis Inácio Lula da Silva, in part because high inflation (10% in 2021) has taken a toll on the purchasing power of millions of voters. A lasting global inflation shock, exacerbated by the Russia-Ukraine war, will undermine his chances of catching up.

US — midterm elections on November 6 and the 2024 presidential election

A recent poll found that 74% of American respondents said Russia’s invasion was unjustified, and 76% expressed a negative personal view of Vladimir Putin. But this is a question on which Democrats are far more united than Republicans, casting a shadow over GOP expectations of victory in November.

That vote is still eight months away, and President Biden’s relative unpopularity probably will deliver Congress to the GOP. By summer, Russia’s role in high gasoline prices will matter less than it does today to frustrated consumers.

But what about the 2024 presidential election? Just 3% of that poll’s respondents who voted for Donald Trump in 2020 were willing to say Biden is “doing a better job leading his country” than Putin is. If Trump runs again, his continuing public admiration for Putin — the former president called the Ukraine invasion “genius” — could cost him considerable support. After all, 58% of Republican voters back Ukraine at the moment.

Even if Trump settles for the role of GOP kingmaker, his support of Putin could divide both Republican leaders and voters — and alienate some GOP-leaning independents. Especially in the highly likely event that Russia features prominently in election-year headlines.

US ban on Russian oil imports not coordinated with NATO allies

What are the ramifications of the US ban on Russian oil imports? For Ian Bremmer, it’s not clear yet, but it could make Western allies look weaker because the US didn’t coordinate with them.

Any surprises on Russia’s list of unfriendly countries? Monaco and Switzerland, where Russians do a lot of business.

Is Xi Jinping facing a hard wartime choice for China? Not in his view. Ian believes that the Chinese want to avoid another Cold War, but if it happens, it’s very clear whose side they'll be on. Hint: not Biden’s.

Watch this week’s World In 60 Secondshere.

Hard Numbers: Golden Arches close in Russia, Kremlin lists its enemies, nickel blows up, North Korean nuclear program stirs

Tracy Moran

850: McDonalds will temporarily close its 850 restaurants in Russia in response to Putin’s invasion of Ukraine. The 62,000 people it employs there will, however, stay on payroll. The opening of the first McDonalds in the Soviet Union, in 1990, was a historic and optimistic moment during the Cold War.

48: On Tuesday, the Kremlin published a list of 48 countries and territories deemed “unfriendly” to Russia. The US, EU, and, oddly, Taiwan are all on it. A recent Kremlin decree permits Russians to repay any foreign currency debts to these “unfriendlies” in rubles. However, the decree does not oblige creditors to accept the nearly worthless Russian currency.

100,000: The London Metal Exchange suspended trading of nickel on Tuesday after prices more than doubled to over $100,000 per metric ton. Russia is the world’s third-largest nickel producer, and the war in Ukraine is fueling concern about the supply of the metal, which is used to make stainless steel and EV batteries.

4: Roughly four years since North Korea officially shuttered its Punggye-ri nuclear testing site, experts have detected “very early signs of activity” there. Analysts believe the Hermit Kingdom may be gearing up to resume nuclear and long-range missile testing. Not now, North Korea!

Humpday recommendations: Odessa, posh French real estate biz, Polish vodka

Read: Odessa: Genius and Death in a City of Dreams — by Charles King. Here is the tragic and triumphant biography of one of the world’s most fascinating cities. It’s a place where history, poetry, commerce, humor, and violence have collided for centuries. Sadly, this great place is making news this week for all the wrong reasons. — Willis

Watch: The Parisian Agency — Comment dit-on “super posh”? If you dream of buying a luxury home with a stunning view of the Eiffel Tower or Notre Dame, you need to check out The Parisian Agency. This Netflix series (Season 2 just dropped) follows a family-run real estate business that sells increasingly posh digs in the French capital to an increasingly wealthy clientele. You’ll come away practicing your pronunciation of “luxe” and “tip-top” while salivating over decors ranging from Versailles-style opulence to Creole-chic cabins. — Tracy

Drink: Zubrowka — Now that many Western retailers are boycotting Russian vodka, and some US states are even banning it, try this Polish brand, my favorite. It’s lightly flavored with a blade of bison grass — which it’s named after — in each bottle. Best served neat or on the rocks, but it also goes well with a splash of apple juice. — Carlos

Words of wisdom

“Why bother remembering a past that cannot be made into a present?”

— Søren Kierkegaard

This edition of Signal was written by Willis Sparks, Carlos Santamaria and Alex Kliment. Edited by Tracy Moran. Graphic by Paige Fusco. Spiritual counsel from Gabrielle Debinski and Frozen stars singing for Ukraine.

In this special edition of Signal, we'll look at how to transform the Great Resignation into the Great Return. We track the future of work and workplace culture, a cautionary tale from Germany, and the 1.1 million women in the US whom employers need to woo back into the workforce. This edition is part of the “Living Beyond Borders” series, presented by GZERO and Citi Private Bank.

Thank you for reading — please tell your friends to subscribe here.

- The Signal team

Getting from the Great Resignation to the Great Return

Carlos Santamaria

It’s a job seeker’s market.

Over 47 million Americans voluntarily left their jobs last year, almost 13% more than in 2019. That was before the pandemic, which has upended the relationship between workers and employers as much as it has disrupted all our lives.

It’s not just a US phenomenon. High turnover rates extend across comparable OECD economies. Nearly a quarter of Brits and a third of Australians plan on switching jobs in the next several months.

The picture is somewhat different in the developing world. Hundreds of millions of people who lost their jobs during the pandemic — mostly in the informal economy — still can't find work because COVID obliterated entire industries such as tourism. Chinese companies, meanwhile, are struggling to retain young employees who are fed up with low pay and long hours.

The Great Resignation is thus a global problem, in varying ways, as will be the Great Return. With the omicron scare easing in the West, many companies there have begun trying to figure out how to woo millions of now-remote (or recently resigned) employees back to the office — precisely at a time when it’s gotten harder to find and retain talent.

Here are three ways employers might have success.

The most obvious fix is to raise salaries. That’s already happening for some. US wages grew on average 4.5% last year, the highest annual rate in almost 40 years. But with US inflation currently at 7.5%, that annual bump is actually a pay cut in real terms, and higher salaries won’t entice everyone.

What’s more, upward pressure on salaries is likely to contribute to even higher inflation.

Another option is additional benefits for employees, especially those who feel more productive working from home and see little upside to returning to the office. Many companies have already adopted permanent hybrid schedules, with workers coming in twice a week.

But some CEOs want everyone in the office five days a week. They just don't get it, US organizational psychologist Adam Grant toldGZERO World. Grant argues that worker productivity “is about the purpose and the process that you bring to your job (...) not about the place you happen to be doing it in.”

Apart from going hybrid, governments are increasingly backing experiments such as four-day workweeks to deliver more work-life balance. This approach has already been tested — with varying degrees of success — in Iceland, Spain, and it will soon be trialed in England.

Finally, companies that struggle to find talent where they’re based might opt to find it elsewhere, including overseas. That means more people working remotely from other US states or even abroad, which could have big political implications.

Imagine all those American manufacturing jobs that went to Mexico thanks to NAFTA, or to China after Beijing joined the WTO. This time, though, US labor outsourcing would hit the laptop class — the one that has benefited the most from globalization and a digital-first world.

As Eurasia Group CCO Alex Kazan points out on the Living Beyond Borders podcast, a post-pandemic hiring spree of remote labor from low-income countries could be politically toxic amid the surge of nationalism and protectionism we've seen in places around the world. But if done right, it could also be viewed as an expansion of a flexible gig economy that can spur greater inclusion in a global workforce.

“We're still a long way away from a global labor pool, but certainly the normalization and acceptance of technologies that enable remote work make that a more plausible future,” Kazan says.

Meanwhile, WFH is not going away. If companies in advanced economies want to lure their employees back to the office, most firms will need to reshape workplace culture to embrace remote working and hybrid models.

The Graphic Truth

The pandemic has enabled some professionals to work remotely from home — or anywhere. Digital nomads wander the world in search of the perfect place to hunker down with their laptops, prompting some countries to offer them special visas. Where should you go if you can work from anywhere?

CIO Strategy Webcast Series

Citi Private Bank

Join us each week on Thursday at 11:30am EST for a conversation with senior investment professionals and external thought leaders on timely market events and ask your most pressing questions.

Register now.

What We're Watching: Gorillas in the gig economy & work struggles for the "sandwich generation"

Gabrielle Debinski

Gorilla unicorn to gig goat: a cautionary tale. Last year, a new Berlin-based food delivery company called Gorillas was going bananas. With its minimal branding, pro-biker vibes, and good service, the company became the first German tech “unicorn,” meaning it raised enough capital to be valued at more than a $1 billion dollars. But then the wheels came off as its gig workers, angry about late payments and poor working conditions, tried to organize in protest, and hundreds were fired. The company continues to function, but it recently set up its holding company in the Netherlands. The tale of Gorillas is both an inspiring and cautionary one. Over the past 10 years, gig work, facilitated by new technology platforms — think Uber, Seamless, Fiver, etc — has grown rapidly. Close to 30 million Europeans secure work through digital platforms, and the EU says that could rise to 43 million by 2025. In the US, one in 10 American adults relied primarily on “on demand” work as of 2020. This has vastly expanded opportunities for employment and broadened companies’ ability to source talent and skills on demand. But that flexibility comes at a cost for employees, who lack the workplace protections and benefits normally associated with full- or part-time work. Policymakers are still trying to balance the pros of flexibility with the cons of “precarity.” The EU is leading the legislative charge on this, with a sweeping set of reforms that would force gig platforms to classify their workers as employees and give them more bargaining rights. Supporters say it will boost the gig economy to a fairer footing, while critics worry it will make them less efficient and more expensive.

Is the “sandwich generation” being frozen out? The pandemic has been difficult for people of all demographics, but the costs – and disruptions – have been particularly severe for the “sandwich generation.” Those include people in their 30s, 40s, and early 50s who are trying to balance careers along with caregiving responsibilities for young children and parents. This burden is disproportionately felt by women, who make up 60% of this demographic in the US, according to Pew. Anecdotal evidence in the US, UK, and parts of the European Union, suggests that the pandemic has forced these already-stretched individuals to give up jobs and shed work hours in order to take on the added burden of helping with home-schooling and elder-care responsibilities. There are signs that many of these women have not made their way back into the labor force. While men have mostly recouped their pandemic job losses in the US, women are lagging far behind: there were at least 1 million fewer women in the workforce in January 2022 than two years earlier, according to the Bureau of Labor Statistics. Some experts warn that things are still taxing for older members of the “sandwich generation” because young adults, whose education and work life have been disrupted for the past two years, are becoming more dependent on their parents for housing and other support. Many businesses are ramping up “return-to-work” programs to help lure women back to work after long absences. But these programs are often limited in scope, and being out of work for extended periods can make it more difficult to secure desirable roles.

Hard Numbers: India needs non-agri investment, American women lag behind, WFH forever, Iranian job woes

Gabrielle Debinski

90: India will need to create 90 million new non-agricultural jobs by 2030 to reach its economic potential, according to McKinsey. The pandemic drove tens of millions out of cities to work in farming back in their villages, but economists now say that the government needs to boost urban production to maximize growth.

63: The US economy has shed millions of jobs since March 2020, with female workers accounting for 63% of the lost gigs, according to the National Women’s Law Center.

91: A whopping 91% of Iranians surveyed say they feel negative about their local job markets. The Iranian labor market continues to be strangled by tough economic sanctions, but if a nuclear deal is reached in the near term, employment opportunities and industry will expand significantly, experts say.

59: Two years into the pandemic, 59% of Americans who can work from home say they are doing so all or most of the time. Before the pandemic, 23% said they worked from home frequently.

Podcast: Living Beyond Borders 

GZERO Media and Citi Private Bank teamed up to produce a special-edition podcast series called “Living Beyond Borders.” The segments focus on everything from pandemic lessons and what to expect at work in 2022 to China’s changing trade priorities and the importance of biodiversity to the global economy.

Listen to the series here.

This edition of Signal was written by Gabrielle Debinski, Alex Kliment, and Carlos Santamaria. Edited by Tracy Moran. Graphic by Ari Winkleman, art by Annie Gugliotta.