No Retreat, No Add Vance

By Michael Every of RabobankIt’s Friday the 13th, traditionally a day when bad things happen - so far we have bad omens; not just a spike in JGB and Australian bond yields this morning, but that Microsoft Outlook and Teams are both down, so I don’t know who will be able to read this.The US has decided it can’t reach a deal to end the Ukraine war without Europe, yet the Ukrainian press says, ‘Europe wants a seat at the table with Russia. It can't agree on who gets it.’There seems little chance of any agreement being struck regardless of who gets that hot seat. Putin stated deploying foreign peacekeeping troops to Ukraine after a peace agreement is "absolutely unacceptable" and would be a continuation of war, implying risks of a military conflict with Moscow. Europe is preparing those peacekeepers now.Worse, Russia’s demands re: security architecture are obviously unacceptable to Europe. Moscow wants limits on future NATO expansion, a rollback of NATO forces from post-1997 members, restrictions on military exercises near Russia's borders, and a ‘sphere of Influence’ granting it effective ‘Finlandising’ vetoes over the sovereignty, foreign policy, and defence choices of neighbouring EU, European, and NATO nations.That only seems to leave escalation, the questions being how soon and to what level.In the Middle East, things look little better. Yemen's Houthis attacked a pumping station on Saudi Arabia's East-West oil pipeline again, underlining that key energy infrastructure remains a target – yet oil doesn’t seem too excited about all the above yet with Brent at $95 at time of writing. Indeed, some see the market having adapted to the level of physical disruption in Hormuz. A former Iranian regime journalist claims the UAE is now buying Gulf oil at a $30 discount, then shuttling it via Oman for large enough profits to offset the security costs. As such, the implication is we would need to see far more aggressive Iranian military actions against shipping and the Saudis (via the Houthis) to choke crude flows again, which would then invite a US military response in turn. In short, things are perhaps stable if still uncomfortable…. but for how long?Trump said no deal is needed with Iran now and shut-down Vice-President Vance negotiations with Tehran. This was a clear public put-down of Vance, widely seen to have started to use the unpopular Iran War as a 2028 election issue favouring himself, as well as to Iran. While Trump said Gulf allies had urged him to pause Iran strikes, which he has agreed to for now, he added he’d renew military strikes against Iran “without hesitation” if needed – and would consider it a defeat if the Iranian regime were still in power by end of his term. That kind of threat is where things can really escalate; so are reports Iran may quit the Nuclear Non-Proliferation Treaty, openly showing it aims to develop a nuclear weapon.In Israel, caretaker PM Netanyahu and PM candidate Eisenkot held their first security briefing, the latter reportedly told that the IDF sees no urgent need to strike Iran; then again, another report from Israel’s Kan news says the US has informed the IDF to prepare for war ahead.If there are no negotiations, regime-change aspirations, and military and nuclear preparations, it seems we are heading for escalation – the only questions being when and to what extent.Nvidia’s CEO Huang resigned, as news of a third affair surfaced, seeing headlines such as: ‘I’m a Piece of Sh--: Jensen Huang’s Last Hours as Nvidia’s CEO’; ‘Jensen Huang’s Exit Will Test AI’s Stocks, and Great-Man Theory’; ‘Nvidia Shareholders Won’t Miss Jensen Huang for Long’; and ‘Hire Tim Cook to lead Nvidia, Trump says.’ Yet key point is that Huang’s departure may signal tighter US controls on AI chip exports to China – with unpredictable consequences.That’s as US Treasury Secretary Bessent claimed that the recent cyber attack on 700 French industrial fridges, which Paris said was carried out by Iran, used Chinese AI to do so – though that may just be Bessent trying to increase the pressure on Commerce Secretary Lutnick, who is reportedly fighting for his job.What kind of post-Huang escalation could we see between the US and China?In more traditional geopolitics, Hong Kong’s South China Morning Post (SCMP) notes in parallel, ‘As Japan looks to strengthen defences and security strategy, analysts warn of escalation.’ There is certainly a lot of it about.Meanwhile, like Friday the 13th, which has now had 12 iterations, the geopolitics/geoeconomics Great Game continues in its own regional takes.In the Americas, the Wall Street Journal notes that ‘The US Cut Cuba Off From the World’s Oil. Now It Runs on American Fuel’, and that the ‘US Collected $12 Billion in Venezuelan Oil Sales, Returning Nearly All of It’, while the SCMP says, ‘US invests in Peru’s Callao as port battle with China’s Chancay megaport continues.’In Europe, Mercedes-Benz is halting new investment in its German plants and considering closures in the face of Chinese competition; and UK PM Burnham said he will discuss “problem” Chinese imports in the final days of planned Brexit reset talks with the EU, showing he still may not have decided who side of which tariff, or rare earth, wall he wants to be on.France also announced an €8.7bn 10-year drive to boost ‘food sovereignty’ by reviving its agricultural industries. This can’t neomercantilism because it wasn’t drawn up in the charming medieval market town of Neomercantile, so it’s just sparkling economic statecraft.