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Welcome to The Geopolity’s What We’re Watching (3W), our daily look at the interconnected worlds of Geopolitics, Economics and Energy. Curated from the world’s leading sources of information, our analysis and commentary is designed to help you make sense of the events driving the major developments in the world.
It is now well over a week since the US announced its “Economic D Day” against Iran. In our assessment of the plan to strangle Iran economically via “secondary sanctions” on countries that trade with it, at 3W we said it was another example of the US clutching at straws to defeat Iran.
Since the announcement of “Operation Economic Outcast”, the economic problems the US and its allies in the West are dealing with, which 3W analysed earlier this week, have come into sharper focus. On Wednesday, bond markets across the western world continued their decline, writes Reuters. The yield on 10-year US Treasury notes rose to a near three-year high of 4.81%. Japan’s 10-year yield was perched above 3%, a 30-year high. Australia’s 10-year government bond yields rose to 5.198%, their highest level in over 15 years.
Earlier this week the US gathered the finance ministers and central bankers of the G20 group of countries in the town of Asheville, North Carolina, to get them on board with the Economic D Day plan. From the start, however, the US appears to have pilled diplomatic blunder upon diplomatic blunder. The New York Times writes that, first, the US refused to invite G20 member South Africa, based on the unsubstantiated i.e. completely false accusation that it is killing white farmers and stealing their land. Second, the US invited the Russian finance minister without discussing let alone agreeing that with the European attendees. Then third, it forced the gathered ministers to meet with US business executives, while, fourth, refusing requests from other G20 members to have some of their business leaders attend the conference. Lastly, fifth, the US denied press credentials to journalists from The New York Times, The Wall Street Journal and Bloomberg, which Germany officially and formally objected to. From this description, 3W notes, it becomes clear the meeting was not one of “smiles all around”.
Further upsetting many of the international attendees was the fact that every meeting began with US treasury secretary Scott Bessent extolling the state of the US economy under president Trump and urging other countries to be more like America, writes The New York Times.
Bessent’s pushing of an utterly childish plan to solve the profound economic problems faced by many of the G20 countries did not help either. Bessent pitched an idea to promote “financial literacy”, under which young people are granted investment accounts such that can learn to invest on the stock and bond markets, writes The Associated Press. Apparently the idea is that this will support economic growth, and economic growth will solve all economic problems.
The result was thoroughly predictable. America’s allies were not receptive, writes The New York Times. At several points, representatives from Europe, Canada and other nations friendly to the US criticized the US administration for moves that they say have hurt their economies. They voiced displeasure over the war with Iran, which has resulted in disruptions to energy markets and shipping. They also raised Bessent’s surprise decision to sell US holdings of euros to prop up Japan’s currency last month, and the administration’s escalating war of words and tariffs with Canada.
The US also achieved nothing in getting China closer to its point of view. Bessent pushed the idea that many of the G20 economies are having economic problems due to “economic imbalances” caused by China, writes Bloomberg. “Non-market based economies pushing out a never-ending spring of cheap exports is not sustainable”, said Bessent. China pushed back by highlighting the irony in the US position. “G20 members should safeguard free trade, promote inclusive and broad-based economic globalization, and create a favorable policy environment for international trade and capital flows,” said Chinese Vice Finance Minister Liao Min.
Specifically regarding Iran, China did not merely decline to endorse the US position, but it actively blocked issuance of a communique written by the US to make its decline clear to everyone, writes The National.
The others in the room in Asheville made clear they are not decisively in the US camp. Reuters writes that German Finance Minister Lars Klingbeil said the US- and Israeli-led Iran war, together with ongoing US tariff disputes, were also major causes of uncertainty holding back the global economy. Britain said it would maintain a pragmatic trade relationship with China, while navigating what it said was the sensitive issue of trying to reduce imbalances. Canada, which has forged closer economic ties to China since the start of the year, was engaging with China no differently than other G7 countries and with “clear guardrails,” its finance minister Francois-Philippe Champagne said.
While China is flat out refusing to support the US, and the US European and Asian allies losing willingness by the day, Russia is providing Iran important military support. Russia is secretly helping Iran develop advanced supersonic cruise missiles, writes The Financial Times. The multiyear covert program, codenamed C430L, has enlisted some of Russia’s most experienced missile specialists to help Iran develop a new class of weapon capable of threatening US aircraft carriers and other warships in the Middle East. The main purpose of C430L is to help Iran to develop a ramjet propulsion system, an engine that allows a cruise missile to sustain flight at several times the speed of sound.
On the 3W view, this confirms our earlier assessment that the US is truly stuck when it comes to Iran. The New York Times writes that US president made as much clear through his social media updated on Tuesday and Wednesday. In a 24 hour period, NYT writes, Trump from boasting that Iran was defeated militarily, a “failed nation” in economic disarray, to threatening an apocalyptic attack that would leave “very little left” of the country after it had defied his declarations and demands, to asking the people of Iran to please rise up against their political leadership.
For this reason it seems the US military now makes plans to maintain the status quo vis-à-vis Iran. Axios writes the idea behind the plan is to reduce the risk of Iranian attacks on oil tankers, U.S. Navy ships and Air Force aircraft. What this means, in the 3W view, is that the US now acknowledges a military defeat of Iran is no longer a realistic option. It also means that instead of defeating Iran, it now intends to enter into a state of permanent war with Iran. And while this is a betrayal of Trump’s campaign promise to start no new “forever wars”, it is exactly the outcome Israel hoped for when it urged the US to start this war – permanent war on the Middle East. Weakening Iran and the Arabian Gulf countries. Creating “space” for Israel to annex Palestine, the south of Lebanon and the Golan Heights. And soon, we at 3W suspect, opening a new front against Turkiye: first in Syria, then on Cyprus, and who knows where thereafter.