Frontier Markets Weekly, February 6th 2022

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Guinea-Bissau president claims coup attempted—and thwarted. Heavy gunfire raged at the main government complex in Guinea-Bissau early this week, fanning fears that the West African nation was on the brink of becoming the latest country in the region to see a coup, the Wall Street Journal’s Nicholas Bariyo reports. The state television broadcaster on Tuesday reported that a group it described as invaders had damaged the government palace and were holding officials inside.

Photo: Antonio Amaral/Shutterstock, Senegal. Photo: Annika Hammerschlag, VoA

President Umaro Sissoco Embaló later posted a picture of himself sitting with the country’s flag in the background and said separately that an unspecified number of security personnel had been killed warding off the gunmen in a battle lasting over five hours. Sahara Reporters wrote that Embaló said the alleged attack was not just a simple attempt to take power, but was an effort to kill him, the prime minister and the entire cabinet.

According to African Business, ECOWAS—the West African economic community—offered to send forces to Guinea Bissau to help stabilize the country in the wake of the alleged coup attempt.

Somaliland offers US military access to port and airfield as it pushes for nationhood. Somaliland, a peaceful corner of violent Somalia, is offering the US military use of a seaport and airfield overlooking strategic maritime routes in exchange for steps toward recognizing the region as a sovereign country, Michael M. Phillips reports in the Wall Street Journal.

Hoping to capitalize on growing US concern over Chinese expansionism in Africa, Somaliland’s president Muse Bihi Abdi is planning a March visit to Washington, where he is expected to explore American interest in using the facilities in Berbera. The city sits on the Gulf of Aden, a key route linking the Indian Ocean, Suez Canal and Mediterranean Sea.

The Hargeisa war memorial in the city of Hargeisa, Somaliland. Photo: Eduardo Soteras/Agence France-Presse/Getty Images

For decades, Somaliland, a former British protectorate in northwest Somalia, has been conducting a fruitless campaign for international recognition as an independent state. But growing disenchantment in Washington with the US-backed Somali national government in Mogadishu, concerns about internecine warfare in neighboring Ethiopiaand the recent military coup in Sudan are contributing to a groundswell of sympathy on Capitol Hill for Somaliland, which stands out in the region for its democratic elections and peaceful streets.


Myanmar city streets deserted as citizens stage ‘silent strike’ in protest against coup. This week saw the one-year anniversary of the coup in Myanmar what led to a clampdown on opposition that has left more that 1,200 people dead. To mark the anniversary, NPR reported, opponents of military rule urged citizens to stay at home as part of a nationwide “silent strike.”

Myanmar’s commercial center Yangon during this week’s “silent strike” protest.  Photo: RFA, via EurasiaNews

In Yangon, the country’s largest city, and elsewhere, photos on social media showed normally busy streets were almost empty, NPR reported.

On Thursday, Cambodia, which is currently chairing the Association of Southeast Asian Nations, said the regional bloc had invited a “non-political representative from Myanmar…to attend a regional ministerial meeting later this month instead of the country’s military-appointed foreign minister,” after ASEAN barred representatives of the junta from key meetings, according to Reuters.

The news agency also reported this week that the US, the UK and Canada had imposed additional sanctions on the country’s leadership, focusing on officials involved in the prosecution of Aung San Suu Kyi, Myanmar’s de-facto leader who was deposed and arrested during the coup.

Middle East

Qatar assumes pivotal role in Biden’s Middle East policy. President Biden named Qatar as a “major non-NATO ally,” the New York Times reports, reflecting the small Gulf nation’s critical role in supporting US objectives amid a broader realignment in the region. Qatar has been instrumental in brokering Afghanistan evacuation efforts with the Taliban, nuclear talks with Iran, and now in bolstering European allies in case of disruptions to Russian gas supply.

The designation increases Doha’s access to US military hardware and training that has previously been out of reach. The move could especially boost Qatar’s bid for more than $500 million in MQ-9 Reaper drones, which has been pending approval since 2020.

Despite being largely symbolic, the gesture dramatically contrasts with the cold shoulder given to traditional allies Egypt and Saudi Arabia, who have seen delayed arms sales and diplomatic snubs amid increased scrutiny of their human-rights records. —Ken Stibler

US to waive sanctions on Iran civilian nuclear activities as talks heat up. The Biden administration is waiving sanctions on some of Iran’s civilian nuclear activities as it seeks to close a deal with Iran on returning to the 2015 nuclear pact, William Mauldin and Laurence Norman report in the WSJ. The US will once again allow foreign companies and officials to work on certain non-weapons Iranian nuclear facilities, reversing a Trump administration decision in 2020 to sanction that work, which froze this activity.

The U.S. has pursued indirect talks with Iran in hopes that Tehran will return to the nuclear pact.
Photo: Abedin Taherkenareh/Shutterstock

The U.S. decision would pave the way for that work to recommence as part of a restored nuclear deal currently being negotiated in Vienna in talks between Iran, the US and other world powers. According to the Journal, the waivers are related to work aimed at turning Iran’s heavy-water Arak reactor into a less-dangerous light-water reactor and on Iran’s underground Fordow enrichment facility that the nuclear deal stipulates should be turned into a research center.

The sanctions waiver also applies to the export of enriched uranium and heavy water outside of Iran, which was needed to keep Iran within its stockpile limits under the 2015 nuclear deal, intended to stop it from gaining the capacity to produce a nuclear weapon.

Beijing broadens role in Middle East and beyond. Beijing struck over $10 billion in deals with Iraq last year, reflecting a “strong shift” towards the Middle East despite a broader downturn in Chinese Belt and Road investments, the FT’s Edward White and Andrew England report.

Chinese investment in Iraq’s aging oil sector has been a lifeline for a country largely shunned by Western firms amid political instability and heightened operational risks. China’s multi-billion-dollar agreements with Iraq reflect Beijing’s broadening engagement in the region, from defense and oil cooperation with Iran to increased involvement in Afghanistan.

Egypt’s president Al-Sisi with his Chinese counterpart Xi Jinping. Photo: Andrea Verdelli, Reuters, via Al Jazeera

The Biden administration’s strained relations with allies such as Egypt and Saudi Arabia have created openings for Beijing, too. Egypt’s president Abdel Fattah Al-Sisi commented warmly on the two countries’ relationship while he was attending the Beijing Winter Olympics opening ceremony. And Saudi Arabia reportedly views China as a strategic partner in its diversification efforts as Western businesses are still cautious about working with Riyahd after the killing of reporter Jamal Khashoggi. —Ken Stibler


Dismal Russian record in occupied Eastern Ukraine serves as warning. The Russian-controlled areas of Ukraine’s Luhansk and Donetsk regions were once the engines of the country’s economy and dominated its politics. They produced its richest man, billionaire industrialist Rinat Akhmetov, as well as former President Viktor Yanukovych, ousted by the street protests that triggered the Russian invasion in 2014.

Since then, however, the two areas—now nominally independent “people’s republics” inside the larger regions of Luhansk and Donetsk—have turned into impoverished, depopulated enclaves that increasingly rely on Russian subsidies to survive, the Journal’s chief foreign-affairs correspondent Yaroslav Trofimov reports.

A woman walks on the street in Stanytsia Luhanska, the crossing point into Russian-controlled Luhansk, last week. Photo: Anastasia Vlasova for The Wall Street Journal

As much as half the prewar population of 3.8 million has left, for other parts of Ukraine, more prosperous Russia or Europe. Those who remain are disproportionately retirees, members of the security services and people simply too poor to move. Current economic output has shrunk to roughly 30% of the level before the Russian invasion, economists estimate.

As Russian President Vladimir Putin is massing more than 100,000 troops for a possible broader invasion of Ukraine, the developments in Donetsk and Luhansk show what many fear could happen to the rest of the country if he were to carry that out.

Latin America

Argentina turns toward Russia and China. Argentina President Alberto Fernández was due to meet Chinese president Xi Jinping today (Sunday) to sign up for the Belt and Road Initiative, Reuters reports. In addition to becoming the largest Latin American nation to join China’s flagship investment and infrastructure project, Argentina hopes to ink financing agreements for 17 “crucial projects” that were sent last month to Beijing, BN Americas earlier reported.

These investments, which reportedly include a $9 billion nuclear plant, dams, roads, and trains, expand a relationship that already includes a $19 billion currency swap arrangement and large-scale commodity purchase agreements.

Infrastructure work in Argentina. Photo via BN Americas.

Meanwhile, in a meeting with Russia’s Vladimir Putin, Fernández opened the door to closer relations, saying, “I’m certain Argentina has to stop being so dependent on the [IMF] and the United States and has to open up to other places, and that is where it seems to me that Russia has a very important place.”

Instability in Peru casts shadow over Castillo’s infant administration. Peru’s leftwing president Pedro Castillo, in office for just six months, this week replaced his top ministers for the third time. Castillo made the move after the prime minister, finance minister, and interior minister resigned amid accusations that the president was a weak leader and had failed to tackle corruption, the FT’s Gideon Long reports

Allegations of grand corruption and the discovery of $20,000 cash in a presidential palace bathroom sparked a December attempt at impeachment, a perennial motif in Peru’s unstable executive politics, which has seen four presidents in a tumultuous five years. Policy flip-flopping, party infighting, and Covid-restriction-violating parties have also mired the administration in dysfunction amid what one outgoing secretary described as “the absence of an organized system of work.”

Pedro Castillo, Peru’s leftwing president, is expected to face further challenges to his rule in the coming months, including possible attempts at impeachment. Photo: Angela Ponce/Reuters, via FT

Castillo’s new appointments reflect a difficult balancing act between tapping far-left ideologies from the base or influential moderate leftwingers. His appointments so far suggest another heterodox group, though, mixing orthodox bureaucrats with less experienced politicians who have migrated across the ideological spectrum. —Ken Stibler

Covid-19’s economic fallout batters Latin America. Latin America has suffered nearly 30% of world-wide deaths from Covid-19 despite having just 8% of the population, according to Johns Hopkins University. And in 2020, the region logged the steepest economic contraction anywhere, the IMF said.

Peru saw its currency weaken about 10% last year. Photo: Angela Ponce/Bloomberg News

Now, it is bracing this year for rampant inflation, low growth and high interest rates that promise hardship for tens of millions of people mired in poverty as businesses struggle to survive. Growth this year is expected to reach just 2.4%, far weaker than the rest of the world and down from a 6.8% expansion in 2021.

“The pandemic is leaving the region with more structural damage than your traditional, cyclical recession,” said Ernesto Revilla, head of Latin America economics at Citigroup. In an in-depth report, the WSJ’s Ryan Dube and Luciana Magalhaes explore the far -reaching problems the pandemic has spawned, including political upheaval and increased immigration to the US and Europe.

What we’re reading

Total gives green light to $10b Uganda oil project. (FT)

Thousands in Mali celebrate expulsion of French ambassador. (Al Jazeera

At least 60 people killed in militia attack in eastern DRC. (Reuters)

Thousands displaced in Congo’s east amid rebel, army clashes. (AP

Cameroon: Investigation exposes UK covert military backing. (Africa Report)

Egypt is vulnerable to external financing shock on faster US rate increases. (Africa Report)

South Korea says it has signed $1.6 billion arms deal with Egypt. (ABC)

USBritain and Canada issue new Myanmar sanctions one year after coup. (Reuters)

Myanmar businesses defy army nationalisation threat and join strike. (FT)

Myanmar businesses defy army nationalisation threat and join strike. (FT)

Thailand drops plans to impose 15% crypto withholding tax. (Blockworks

In sign of deepening ties, Taliban increases Afghanistan’s water flow to Iran. (Radio Free Europe)

Fintech and logistics led growth as ASEAN startup fundraising more than doubled in 2021. (Nikkei)

Morgan Stanley sees $8 trillion metaverse market—in China alone. (Blockworks

Turkey’s inflation reaches 50%. (FrontierView

ISIS leader killed himself and family during US raid in Syria, Biden says. (WSJ

Putin and Xi aim RussiaChina partnership against US. (WSJ)  

Video: Putin, Xi show solidarity as Ukraine tensions mount (WSJ)

Hungary’s Orban asks Russia for more gas. (Radio Free Europe)

Turkey’s Erdogan risks angering Russia over trade and arms pact with Ukraine. (FT)

Cutting off Russia from SWIFT will really sting. (Atlantic Council)

EU looks to Azerbaijan to boost natural gas supply. (Radio Free Europe)

Tainted cocaine kills more than 20 people in Argentina. (WSJ)

Chile’s central bank chooses first-ever female governor. (Central Banking)

Chileans protest against Venezuelan migrants. (BBC)

Little Panama’s big ambitions. (Politico Global Insider)

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