In this month’s edition of Around the World with Academy Securities, our Geopolitical Intelligence Group (GIG) focuses on the following geopolitical tensions that we are monitoring:

1. Risk of Escalation Between Israel and Hezbollah
2. Iran-Backed Houthis Step Up Attacks in the Red Sea
3. Russia and North Korea Sign Mutual Defense Agreement
4. China Increases Tensions with the Philippines

We begin this report with an update on the war in Gaza as Israel has indicated that major combat operations in Rafah will soon come to an end. With the remaining Hamas brigades in the city soon to be destroyed, the attention will now shift to the north and the threat from Hezbollah. While the war in Gaza will continue for the foreseeable future (including smaller operations to target the growing Hamas insurgency), Israel will likely move some resources to address the increased level of engagement with Hezbollah. Israel has demanded that Hezbollah forces move back behind the Litani River in Lebanon to provide a security buffer that will allow Israeli citizens in the north to return home. If a diplomatic deal is not reached, there is a high likelihood that Israel will have to expand operations against Hezbollah. Next we address the continuing risk to commercial shipping in the Red Sea posed by Houthi rebels. Iran will likely elect another hardliner as president this week, so we expect continued Iranian support of the Houthis. We also report on the recent meeting between Putin and Kim in North Korea and the mutual defense pact that was signed by the two parties. Both leaders stand to benefit from this growing partnership, with Russia receiving much needed munitions for use in Ukraine and North Korea receiving aid and potentially sensitive nuclear, missile, submarine, and satellite technology. Finally, we provide an update on the tension in the South China Sea between the Philippines and China.

Please reach out to your Academy coverage officer with any questions and we would be happy to engage.

Front and Center: Risk of Escalation Between Israel and Hezbollah

As we have addressed in our previous ATWs, SITREPs, and podcasts, the war in Gaza continues, though Israel is beginning to make preparations for the conclusion of major combat operations in Rafah. In late May, the U.S. brought a peace proposal to the UN, and it was approved by the Security Council. It laid out a three-phase plan that would include a temporary ceasefire and see the release of some of the hostages still held by Hamas. The second phase would then include discussions for a more permanent ceasefire and an end of hostilities. Finally, the third phase would include plans for the reconstruction of Gaza. While both sides seemed open to discussing details, key sticking points like the scope of the initial ceasefire have precluded talks from moving forward. A real risk here is that a second front could open in the north with Hezbollah. On June 11^th, an Israeli strike in southern Lebanon killed high-ranking Hezbollah commander Taleb Sami Abdullah. Hezbollah responded with multiple days of rocket attacks on Israel, with Israel responding in kind. As Netanyahu has indicated that he would like to see Israeli citizens back in their homes in northern Israel by the start of the school year in August, the fear is that a larger operation to push Hezbollah forces back behind the Litani River is on the table. Hezbollah has stated that it would invade northern Israel if a full-scale war broke out as a result. Neither side wants a broader conflict at this time, but there is a very real risk that an incident could occur in the north that quickly escalates the fighting with Hezbollah. The Iran-backed group is a significantly more capable fighting force than Hamas and is believed to possess over 150,000 rockets/missiles capable of striking anywhere in Israel as well as a force of over 100,000 trained fighters.

“The Gaza ceasefire talks have broken down once again because Israel and Hamas desire different outcomes and have differing positions on how to get there. Hamas is unwilling to accept a ceasefire without Israel’s agreement to a permanent withdrawal from Gaza. Hamas wants a permanent end to the hostilities that guarantees their survival. Israel is willing to agree to a temporary ceasefire under the three-phase U.S. plan to get some of the hostages out in phase one which paves the way for follow-on discussions in phase two (but without an agreement on a permanent ceasefire). Israel’s plan is to pause, get some of the hostages out, and then continue with their campaign to defeat Hamas. Their plan to end the war has three primary objectives: destroy Hamas’ military and civil governance capabilities, secure the release of all hostages, and ensure that there is no threat to Israel from Gaza. Israel will not leave Gaza with an existing threat intact. Israel also wants a buffer zone in Gaza and a new government without Hamas. The Biden administration continues to put intense pressure on Israel to accept a ceasefire while they agree with Israel regarding the need to defeat Hamas. In the end, the biggest challenge is not having a plan to rebuild and govern Gaza.” – General Robert Walsh

“Hamas is more than ready to fight to the death of the last innocent Palestinian seeking refuge in Gaza. The status of negotiations clearly demonstrates that Hamas’ loyalty is to itself alone. The initial strategy of a rapid attack to wipe out Hamas has floundered on the realities of combat in an urban area packed with innocent civilians. A different way of prosecuting this campaign is necessary, but with the loss of moderate elements of the government, this may continue along the current lines of operation for some time. Iran is carefully metering the intensity of Hezbollah strikes into northern Israel, and may not respect the Israeli government’s desire to have the fires stop before the school year starts. While limitations on U.S. munitions may impact Israel’s mass of fires, it is unlikely that the U.S. would fail to provide deterrence (and potentially strikes) against Iran/Hezbollah should the situation escalate.” – General Michael Groen

“The maximalist demands on each side make any solution via a ceasefire problematic. As General Groen points out above, Hamas leader Sinwar is leveraging the death of innocent Palestinians to his advantage in the world court of opinion against Israel. Israel, as General Parker points out below, sees collusion with the Palestinian people and frankly the casualties as a distant second, at best, to bringing home the hostages. Israel now has to balance this with the growing possibility of an escalation of combat operations into Lebanon which could mean, at a minimum, air strikes and ground forces in an attempt to reset deterrence with Hezbollah and preclude direct Iranian strikes. The U.S. will play a role in this calculus as well and could be pulled into a more direct combat role, but only if we see direct Iranian strikes in support of Hezbollah. There may be a wildcard here should the IDF capture or kill Sinwar. Twenty years of the counter-terrorism fight has shown us there is really no such thing as a decapitation strike, so it remains to be seen if removing Sinwar and several of his key lieutenants from the battlefield will deter the remaining leadership from pursuing the same maximalist goals. The challenge is there are really no options for Hamas short of sustaining the fight or being dissolved by the IDF.” – General Robert Ashley

“Israel and Hamas will continue fighting (as Netanyahu has stated) at least until the end of the year. Israel has closed the front door from Egypt through tunnels into Gaza. The subsurface supply routes should eventually be shut down, pushing resupply to the surface and affecting arms and ammunition replenishment. This was a key requirement to any end state. Hamas has no incentive to end this fight as they know the Israelis will continue to hunt them regardless of a ceasefire. Hezbollah leadership has stated that they have the ability to mobilize region-wide militias and partisans supported by Iran if Israel attacks or starts a larger war with Lebanon. Clearly the rhetoric about Cyprus and the Iranian regional surrogates are worrisome in the event of an expanded conflict. Of course, the longer the IDF has reservists mobilized, the tougher it is for Israel’s economy and businesses. This is not just a military fight. War with Hezbollah would likely make it easier for the U.S. to provide Israel with more weapons.” – General Frank Kearney

“Oct 7th was the catalyst for a strategy switch from containment to eradicating Hamas as a threat. While hostages are highly emotive and distort public opinion, a majority of Israelis feel that the population of Gaza is entwined with the terrorists in Hamas. The Israeli government knows this, and it will do what it can to manage global opinion. Political change in Israel is unlikely to alter this now that the operation to destroy Hamas has gotten this far. Wider regional dynamics must be kept under scrutiny. Iran’s linkage to Russia (and China) means that increased tension in Southern Lebanon could be particularly dangerous and exacerbate the rift between the West and the BRICs/Global South.” – General Sir Nick Parker

Iran-Backed Houthis Step Up Attacks in the Red Sea

As we have addressed in our previous ATWs, as a show of solidarity with Hamas, the Iran-backed Houthis have continued their attacks on commercial shipping in the region. Last week, a Greek-owned coal carrier, the MV Tutor, was hit by Houthi forces and capsized, making it the second ship sunk by the rebels. While U.S. and coalition forces have also increased their attacks on Houthi positions in Yemen, the Houthis continue to find ways to successfully strike commercial shipping. Iran is the Houthis’ main sponsor, and even in the run up to the June 28^th Iranian elections that support does not seem to be declining. Six candidates received approval from supreme Leader Ayatollah Ali Khamenei, and almost all of them are hardliners, so little is expected to change with respect to Iran’s policies moving forward. Saeed Jalili is a former secretary of the Supreme National Security Council and a nuclear negotiator. Speaker of Parliament, Mohammad Baqer Qalibaf, is a former general in the IRGC and served as the country’s police chief and mayor of Tehran. Three other candidates are also believed to be hardliners – Tehran Mayor Alireza Zakani, Vice-President Amirhossein Qazizadeh Hashemi, and Mostafa Pourmohammadi. Finally, Massoud Pezeshkian, a member of parliament, is a relative moderate. Regardless of the winner, Khamenei will continue to drive the strategic decision making in Iran regarding its nuclear and ballistic missile programs as well as its support of proxy forces in the region.

“The election of Iran’s next president is breaking out as an opportunity for Ayatollah Ali Khamenei to reassert his hardline supremacy. The election has narrowed to six hardline candidates all approved by Khamenei. Mohammed Bagher Qalibaf is an ally of the supreme leader and appears to be the favorite. All six of the finalists ensure virtually no changes to the regime’s human rights violations, growing nuclear program, and increasingly close relations with Russia and China. Iran’s objectives will remain to remove the U.S. from the Middle East, completely replace Israel with a Palestinian state, and replace the U.S.-led international rules-based order. The past round of reciprocating strikes between Iran and Israel that brought their shadow war into the open seems to have ended for now. This could lead to an arms race that impacts the rest of the Middle East. Meanwhile Israel is positioning itself in Gaza for a broader military operation to take on Iran’s primary proxy force Hezbollah in Lebanon. The IDF is prepared to escalate the situation to quiet the border in hopes of returning the 60,000 Israelis that have been displaced near the border. Israel is talking tough while it appears that both sides would rather not widen the war.” – General Robert Walsh

“The U.S. is focused on neutralizing the Houthis’ aggressive (and illegal) behavior in the Red Sea. It requires a larger and more persistent military engagement that includes regional contributions (Egypt, Saudi Arabia, Kenya, GCC nations) as well as the ongoing partnerships with the UK and France to achieve a more immediate solution. However, the Houthis are not surprisingly resilient, and will not be eliminated (or significantly degraded) as a threat without a full diplomatic and military campaign which is not likely given the challenges elsewhere (Gaza, Lebanon, Ukraine). This threat will remain for the near-term. The Suez is a ‘global common’ and as such all nations have an interest in complete access. The U.S. is the best at building coalitions of partners and is leading that effort. The risks (financial and physical) can be mitigated. This is what a “hold” action looks like – maintain the effort, continue to engage diplomatically, build consensus, get military contributions from others with shared interests, and increase pressure. This is the strategy. It will take until 2025 (post-election) to measure the effects.” – General Spider Marks

“Iran can’t be taken into context alone. Iran, Russia, China, and North Korea are all leveraging opportunities that they each benefit from collectively. We are in direct confrontation to determine what the world order will look like going forward.” – Admiral Robert Harward

Russia and North Korea Sign Mutual Defense Agreement

Last week, Putin met with Kim in North Korea (see SITREP), the first meeting between the two leaders there in 24 years. Over the past two years since Putin started the war in Ukraine, it has become clear that he requires support in the form of munitions from third parties and Iran and North Korea have both come to Russia’s aid. In particular, the relationship between Putin and Kim has been growing closer over the past year. Last September, Kim took a very rare international trip to visit with Putin near the border with Russia. Putin’s asks included more weapons for use in the war in Ukraine and Kim likely requested assistance with advanced technology related to his nuclear, ballistic missile, submarine, and satellite programs. In this most recent meeting last week in North Korea, while many of the same requests were made, a mutual defense pact was also executed. While the final details have yet to be released, it obligates each country to come to the other’s assistance if ever attacked. With U.S. and NATO weapons beginning to flow into Ukraine once again, Putin needs all the military support he can get as the war continues throughout 2024 (especially after Putin’s latest peace conditions continue to be a non-starter). However, one party keeping a close eye on this new pact is China. While nothing disclosed to date is likely to upset Xi in any material way, the fact that Russia is growing closer to China’s neighbor and bringing additional and unwanted attention to regional military pacts could result in Japan, South Korea, and others looking to the U.S. for stronger assurances (and South Korea even threatened to send military aid to Ukraine). While this deal is great for both Russia and North Korea, it could end up putting China in a difficult position as other Asian countries wary of North Korea could use this defense pact as an excuse to move closer to the U.S. and away from China.

“The U.S. decision to give Ukraine permission to use U.S.-supplied weapons to counterstrike inside of Russia with narrowly defined caveats follows the same sentiment expressed by several European leaders. The change is necessary as Russia has upped its campaign to destroy Ukraine’s civilian infrastructure using weapons originating in many cases from inside of Russia. This policy change raised tensions between Putin and the U.S. as he called this a dangerous step and threatened to strike other NATO targets. He then used the deployment of Russian naval vessels to Cuba and likely Venezuela as a response to the U.S. decision to grant Ukraine permission to use the U.S. supplied weapons to strike inside of Russia. The deployment is Putin’s way of demonstrating that Russia is still capable of global power projection and threatening U.S. national security. Putin’s trip to North Korea where he signed a defense pact with Kim Jong Un pledging mutual support is another escalatory step. This goes beyond North Korea providing weapons to Russia for the battlefield in Ukraine and is another provocative action that aligns with China’s, Russia’s, Iran’s, and North Korea’s plan to counter the U.S.-led international rules-based order.” – General Robert Walsh

“There is likely a layered calculus that Putin is considering. First, with EU members and the ‘support Ukraine’ message gaining traction in EU states (largely in anticipation of U.S. election outcomes), Putin may feel increasingly isolated and in need of clips for internal Russian media consumption that show he is still an active global leader. While the DPRK is a poor substitute for relationships with the rest of the world, it will fill domestic Russian TV screens with pictures of their leader acting the part of an international actor. Second, Russia is still expending incredible amounts of artillery ammunition, a demand signal that the DPRK can meet. From the DPRK side, they are eager for more advanced military technology. Kim is also eager to be seen as a modernizing and international leader (although ratings are not an issue for him). Gaining access to Russian technology and designs might position the DPRK to become an industrial production center for Russia’s military industrial complex. This might offset the massive corruption and inefficiency in the Russian military arms industry. Finally, the highly publicized visit might reinforce the narrative of an alternative alliance (of sorts) to counter the West. China’s reaction through their public statements will be important to watch, and may be the most important reflection of this ‘Potemkin visit’ between Putin and Kim.” – General Michael Groen

“I would assess the meeting was a combination of both show and substance. The impact of North Korea’s support goes to Putin’s theme that it is futile for NATO/the West to think they can outlast him. There is also reporting from CSIS laying out Kim’s needs related to advanced telemetry, nuclear submarine technology, military satellite wares, and ICBM related technology. Kim’s wish list and Putin’s support create a dilemma for the U.S. and our allies by increasing Kim’s capability and reliability of weapons systems that not only can threaten the region, but can also reach the U.S.” – General Robert Ashley

“This meeting shows that even though Putin has increased the size of his military and the defense budget, Russia doesn’t have the military industrial base for a sustained multi-year conflict like the Western alliance has. Despite superior Russian numbers in manpower, weapons, and ammunition, they have been unable to make real gains against Ukraine. North Korea is an available supplier for missiles and artillery. Russians certainly can help North Korea with space and missile technology to improve North Korea’s capabilities, so the relationship is mutually beneficial. The Russian ceasefire plan is Putin’s offering, but the Ukrainians and supporting allies won’t buy that (except for Hungary). Putin’s rhetoric is for home consumption and for those countries that support Russian aggression. I think both sides have deep defensive belts, and it will require a concentrated effort to make any gains. The North Korea visit really is a plus for Kim who needs support and assistance to overcome sanctions from the UN and western nations. None of this is surprising and seems like a natural course for a North Korea-Russia bilateral relationship.” – General Frank Kearney

“This war is now a slugging match. Ukrainian military innovation is a potential battle winner. But the resolution of civil society and economics is likely to determine the outcome in the medium-term. How long can Zelensky maintain his political mandate? Can the economics of a wartime economy be sustained? And in the longer-term has the global balance shifted away from the West (and the U.S. ability to underwrite the security of liberal democracies)? If this is the case, smaller economies such as the UK will become increasingly vulnerable unless they can improve resilience and reliance on global trade particularly from China.” – General Sir Nick Parker

“While many argued against providing the F-16s and training for the Ukrainian pilots by saying it wouldn’t significantly shift the military advantage to Ukraine, it’s reasonable to expect the Ukrainians will surprise the Russians with their ingenuity. Ukraine is displaying their expertise at integrating the eclectic weapon systems they’ve received from the West to date, and modifying them to fill their offensive and defensive capability gaps. The French confirmed their work to adapt the AASM Hammer bombs to be employed by the F-16s. Ukrainian Mig-29 and Su-27 fighter pilots have already employed the AASM Hammer earlier this year.” – General Mary O’Brien

“We are starting to see Russia ramp up the information warfare campaign against the U.S. in advance of the fall elections, much like what we saw four years ago. However, their tactics, techniques, and procedures have matured. They have hundreds of troll farms spewing disinformation/misinformation in the hope of swaying elections and their methods and effectiveness have improved. U.S. Cyber Command and other government agencies like the NSA have the Russian playbook on how to use misinformation and disinformation to influence voters particularly on social media. The difference this time is the advances in artificial intelligence, deepfakes, clickbait technology, etc. that make it almost impossible to distinguish truth from misinformation. Plus, the unsophistication of social media users and propensity to share information regardless of source make the problem insidious and hard to stop or counter. This is particularly true if the message aligns to an existing belief or conspiracy theory. The first story that is out there is normally the one that sticks, so debunking it later even with facts is challenging. Government agencies are working hard to get ahead of this before our November election, but it is an all-hands effort, and academia/businesses must be aggressively involved too. Companies should have their PR, media, and marketing departments scrolling the internet to find misinformation/disinformation being put out about their companies.” – Admiral Danelle Barrett

China Increases Tensions with the Philippines

Immediately following the inauguration of President Lai in Taiwan in May, China staged the largest naval and air exercises around Taiwan since former President Tsai’s visit to the U.S. in 2023. However, while these exercises are usually well-coordinated and monitored by U.S. forces in the region, the recent encounters between Chinese coast guard/maritime militia forces and the Philippine Navy have become more dangerous and unpredictable (see ATWs). Over the past few months, Chinese forces have gotten more aggressive with Philippine resupply vessels around the Second Thomas Shoal, where the Sierra Madre was grounded to act as a Philippine territorial outpost 25 years ago. In addition to using water cannons and even ramming the ships, the Chinese coast guard last week seized supplies and two Philippine rubber boats used in the resupply operations, injuring a Philippine crewman. Following the incident, the U.S. reiterated the mutual defense agreement it has with the Philippines. If a Philippine sailor were to be killed in one of these incidents, there is a chance that President Marcos could invoke the treaty and call upon the U.S. for assistance. In an effort to stay in front of this, the defense chiefs from the U.S. and China met in Singapore at the end of May to try to ensure open lines of communication between the two militaries, specifically designed to deescalate any potential incident. However, as the Chinese get more aggressive in the region, the chances of a miscalculation increase and there is a risk of a much larger confrontation.

“U.S. Defense Secretary Austin and his Chinese counterpart met face to face for the first time since 2022 at the Shangri-La Defense Forum in a continued effort to restore communications and prevent conflict as tensions continue to rise in the Indo-Pacific. Austin stressed that China’s aggressive military actions to pressure and coerce Taiwan during a time of political transition are unacceptable. China carried out a series of war games and exercises after the election that raised the risk of a quarantine of Taiwan by the PLA. China continues these military actions to demonstrate they have complete control over the military situation surrounding Taiwan. Austin then condemned China’s recent provocative actions to intimidate the Philippine military’s resupply missions to the Second Thomas Shoal. Adding to the situation was China’s new law giving its coast guard permission to seize foreign ships that illegally enter China’s territorial waters. The disputed waters around the Second Thomas Shoal are claimed by China but this claim was overwhelmingly rejected by the international Permanent Court of Arbitration. China rejected the international court’s decision. The Chinese have shown their aggressive actions are not limited to Taiwan. The Chinese Defense Minister followed Austin’s comments by condemning U.S. missile deployments and U.S. military exercises in the region saying they are destabilizing. He then urged the U.S. to correct its mistakes and follow the agreed to one-China principle concerning Taiwan and not assist in any moves to support Taiwan’s independence. China’s aggressive behavior is significantly increasing but the two sides are now communicating.” – General Robert Walsh

“Resolution of the Taiwan issue in a favorable light is a legacy issue for Xi Jinping. His own (and his nation’s) military credibility makes Taiwan a singular focus. As has been noted, a Taiwan or South China Sea campaign is about the only scenario in which the People’s Liberation Army might win over the globally distributed maritime power of the U.S. and its allies. China seeks to grow its global maritime ability through one-sided deals on port architectures, ship building expertise, and increasingly advanced weapons. The rate of growth of their navy continues to vastly exceed the prowess of U.S. shipbuilding. An anti-ship missile ‘porcupine’ strategy for the Philippines (and potentially others) that turns the tables on maritime deterrence would likely give pause to China’s adventurism.” – General Michael Groen

“I think U.S. posture and activities are what the Chinese expect and why they continue to expand naval capabilities and continue to extend their operational reach in the South China Sea and beyond. U.S. and bilateral partners will continue to be challenged by Chinese air and sea elements. All engagements create learning opportunities and pressurize the situation. The U.S. carrier heading to exercise with South Korea will also up the tensions and activities. Carriers are a clear indicator of U.S. intent in the region and one the Chinese watch closely.” – General Frank Kearney

“Xi cannot be seen giving any ground in the maritime domain. His position in the region is that this is Chinese territory, and the PLA/PLAN will continue to flex their expanding capabilities. One would do well to study the game of Go to watch where each side strategically places its stones as China attempts to control more and more territory. As with Go and unlike Chess, short of a major war, there is likely no penultimate move…unless Xi moves on Taiwan by force or by strategically placing his stones across the DIME framework in such a way to gain dominance over Taiwan, over time, without firing a shot. Back to General Groen’s point…how does Xi see his legacy and is the clock ticking on subjugating Taiwan on his watch?” – General Robert Ashley

“It is interesting in that China’s actions in the region have actually worked against them as many Pacific and Asian nations are increasing their defense spending (Australia, Japan, South Korea, Taiwan, Philippines, India, Vietnam) and conducting more mutual defense training with both us and partner nations as witnessed by the growing multinational exercises being conducted in the INDOPACOM region. The Army of the Pacific recently held their LANPAC Symposium with 30 armies present and 13 Chiefs of the Army, where they discussed the importance of strong relationships, respect for each other, a stable and secure region where every country has the right to choose, and their responsibility to maintain/preserve the peace through hard and soft power against North Korea and China. Our relationships with our allies and partners is our strategic center of gravity that currently allows us to defeat any threat. At this time, China has no desire to fight the U.S. or any coalition but that will not stop them from continuing to bait the Philippines, Taiwan, India, Japan, and Vietnam in hopes of setting conditions for a minor/accidental incident being exaggerated by Chinese media reporting to garner international support. Their goal remains to use soft power against U.S. allies to strengthen ties with them and sway public opinion of China as a preferred partner and peaceful nation.” – General KK Chinn

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