Around the World with Academy Securities
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:
- Update on the War in Gaza
- Iran Elects a Reformist President
- Russia Enhances its Partnerships to Support its War in Ukraine
- Increased Tensions with China in the South China Sea
We begin this report with an update on the war in Gaza as Israel has indicated that major combat operations may be coming to an end, though smaller, more targeted strikes will continue for the foreseeable future. While ceasefire discussions are ongoing, the concern is that the escalating back and forth strikes between Israel and Hezbollah could erupt into a larger conflict unless a diplomatic solution is reached on both fronts. Next, we address the election of the new president in Iran, and while Masoud Pezeshkian ran on a reformist platform, little is expected to change with respect to Iran’s international policies as Supreme Leader Ali Khamenei is still the key decision-maker. We also provide an update on the war in Ukraine as Russia continues to reinforce its military and economic partnerships. North Korea and Iran are supporting Russia militarily, and despite international pressure, China will likely continue to provide dual-use materials that are critical to Russia’s defense industry. In addition, Putin’s recent visit with Indian PM Modi in Moscow was designed to reinforce the bilateral trade relationship with India, which receives 40% of its oil from Russia. This meeting was held right before the NATO Summit celebrating the 75-year history of the alliance. NATO leaders pledged $43 billion in support for Ukraine over the next year and announced an update on the timing of the arrival of the F-16s. We also revisit the tension in the South China Sea as Indo-Pacific nations continue to highlight Chinese military aggression in the region as the rationale for forming additional partnerships. Finally, our GIG will be monitoring the upcoming election in Venezuela, which is slated for July 28th.
Please reach out to your Academy coverage officer with any questions and we would be happy to engage.
Front and Center: Update on the War in Gaza
As we have addressed in our previous ATWs, SITREPs, podcasts, and recent webinar, the war in Gaza continues, though Israel is beginning to make preparations for the conclusion of major combat operations. While both sides seem open to continuing the ceasefire negotiations, key obstacles remain. While Secretary Blinken recently said that he believed that the talks were “inside the 10-yard line and driving toward the goal line” Netanyahu’s visit to DC this week will be critical in seeing if a deal will be possible in the near-term. Earlier this month, Hamas dropped a key demand that the initial ceasefire be permanent and instead seemed to agree that the path to an end to the fighting could be addressed in the first phase, which would see a six-week cessation of hostilities. However, Israel has repeatedly stated that it would not withdraw from the Egypt-Gaza border (Philadelphi Corridor) due to the concern that unless troops remain, Hamas will continue to use the underground tunnel system to smuggle weapons into Gaza. In addition, Israel has increased its strikes on Hamas leadership including the attack on July 13th that targeted the architect of the October 7th attacks, military chief Mohammed Deif, as well as a Khan Yunis brigade leader, Rafa Salama. If the strike did indeed kill Deif (and Israel believes it did), it would be a major blow to Hamas and could put additional pressure on Sinwar to push for an end to the war. However, the concern is that the longer the war in Gaza continues, the risk increases that the situation in northern Israel with Hezbollah will escalate. Time is running short to return thousands of Israeli citizens to their homes in the north with the new school year beginning in September. In addition, the Houthis continue to threaten shipping in the Red Sea as a show of solidarity with Hamas, and the hope is that these attacks will stop following the end of the war, though more signs are pointing to preparations being made by the Houthis for a longer-term campaign against maritime traffic. In addition, with the Houthis sending a drone into Tel Aviv last week and the Israelis responding with strikes on Yemen for the first time, there is concern that this situation could continue to escalate as well. As we will discuss in the next section, Iranian support of its proxies will continue, even as the new reformist president, Masoud Pezeshkian, is inaugurated on July 28th.
“The disintegrating geopolitical stability throughout the world is reducing the world’s focus on Gaza. The world is becoming somewhat numb to the death, destruction, and lack of forward progress towards a ceasefire. The world is slowly moving on from the intense scrutiny that had been put on the war. This gives the IDF the momentum needed to carry on military operations and increase their leverage over Hamas. Prime Minister Netanyahu continues to press his position that even with a ceasefire the IDF will ‘resume fighting until all of the objectives of the war have been achieved.’ Hamas previously was the one holding up the ceasefire talks knowing that the media’s anti-Israeli campaign was working in their favor. That is no longer case, and the tide is turning for Hamas. Previously the Hamas position demanded the removal of the IDF from Gaza before agreeing to a ceasefire. That is no longer a precondition. Hamas is now willing to agree to a six-week ceasefire and discuss the IDF’s removal from Gaza during the next phase of negotiations. They are urgently contacting the Egyptian and Qatari mediators to press for a ceasefire.
Meanwhile, China is renewing its efforts to increase its geopolitical clout in the Middle East by bringing Fatah and Hamas together in a second round of Beijing-led talks. They view this as another opportunity to gain influence over the U.S. in the Middle East like they did by brokering the peace deal between Saudi Arabia and Iran. They want to show that they can be an alternative leader to the U.S. They will have a diminished opportunity to broker a deal between Israel and Hamas due to their criticism of Israel’s execution of the war. Strategically, the U.S. needs a Middle East strategy to counter China’s growing regional influence.” – General Robert Walsh
“It has been (and remains) PM Netanyahu’s consistent plan to eliminate Hamas leadership through a variety of means. These efforts will continue, and this requires control of corridors to execute. The opinion of the Iranian-funded Hamas organization continues to drop among innocent Palestinian civilians (for whom Hamas has shown utter disregard). The lack of an acceptable governance model (post-hostilities) means there is little incentive for a ceasefire other than in exchange for a full and complete hostage release. The conflict with Hezbollah, also fully funded by Iran, creates deterrence mechanisms to keep Israel strained on multiple fronts. Via Hamas, Hezbollah, and the Houthis, Iran and the IRGC can tune the dials to ensure Israel is continuously challenged from multiple directions. China’s ‘statecraft’ here is meaningless. The CCP, which has massive liabilities back home as their economy continues to flounder, is perhaps seeking to grab a headline or leverage this situation to advertise their influence/relevance to the global south. As the buyer of most of Iran’s oil at discounted prices, China is hardly objective.” – General Michael Groen
“It is important to meter expectations. We must acknowledge that any ‘solution’ in the near-term to the war in Gaza, and Israel’s increasingly aggressive attacks in response to a provocative Hezbollah, will be temporary or simply a pre-condition to a series of steps. Hamas leadership cannot continue to exhaust itself against an IDF that will not stop. Counterintuitively, the strategy by Hamas to ensure public vilification of Israel due to the suffering of the Palestinian people decreases as the number of Palestinian women and children killed increases. The heinous and criminal behavior of Hamas coupled with the number of Palestinian deaths have numbed the global perspective of the war and its excesses. The world has moved on…but Israel has not. As Stalin reminded us, ‘A single death is a tragedy; a million is a statistic.’ The war against Israel both by Hamas and Hezbollah has become more antiseptic, and more objective. It’s now a statistic.” – General Spider Marks
“While I don’t subscribe to a marked change in Hamas’ strategy if Mohammed Deif is dead, there may be a growing level of fatigue within Hamas to press for a ceasefire, if not for anything but to refit and rearm. The only thing that a ceasefire possibly addresses is an opportunity for some number of hostages to be released. As Spider points out, the number of casualties is now aligning with the Stalin quote about statistics. Netanyahu could accept a ceasefire and possibly gain some number of hostages or continue to exploit Hamas fatigue. Domestic pressure has yet to cause Netanyahu to back off his maximalist goals regarding Hamas and a two-state solution to the Palestinian issue remains an unacceptable existential threat for Israel. Fighting will continue in Gaza. Meanwhile, Israel is likely moving ahead with plans to escalate their operations against Hezbollah in southern Lebanon.” – General Robert Ashley
“The elusive ceasefire will not be accomplished at least until after Netanyahu talks to Congress in the U.S. Blinken announced this weekend that he believes it is imminent, but history tells us that it remains unlikely. A deal now (if there is a sizeable hostage release) gives Netanyahu space to continue the war with less pushback at home but remember the IDF and Netanyahu said that it will take until the end of 2024 to finish the destruction of Hamas. Hezbollah does not want a full-scale conflict, but it remains possible if escalation continues. The IDF is killing key leaders regularly, while Hezbollah’s rockets are being interdicted (at the current rate of fire).” – General Frank Kearney
“It is worth reflecting that this conflict continues to impact domestic politics in Europe. In the recent UK election, a perception among some sections of society is that the mainstream parties were showing bias towards Israel which resulted in 4 independent ‘pro Gaza’ members of Parliament being elected from areas that would normally be Labour heartlands. This may just be a protest vote, but the new government’s resumption of funding to UNRWA indicates that their position on the conflict has softened since October 7th.” – General Sir Nick Parker
Iran Elects a Reformist President
As we have addressed in our recent SITREP, Iran elected a reformist candidate to replace President Raisi, who was killed in a helicopter crash in May. Masoud Pezeshkian defeated his hardline opponent Saeed Jalili in a runoff election earlier this month. In his message to supporters following the victory, he highlighted Iran’s partnerships with Russia and China and called for strengthening relations with its neighbors. He also indicated that he would like to engage in “constructive” dialogue with European countries, likely in an effort to increase economic activity and investment in Iran in order to offset the impact of the economic sanctions placed on the country by the U.S. In addition, while he did say that “Iran’s defense doctrine does not include nuclear weapons,” he threatened to leave the nuclear non-proliferation treaty (NPT). This thinly veiled threat is likely a warning to the West that he intends to improve his negotiating position if/when nuclear discussions continue. Pezeshkian ran on a platform that was focused on easing the headscarf laws in Iran and engaging with the West to improve the financial conditions in the country. However, it will have to be seen how a new Democratic administration (in light of President Biden’s decision not to run again) or a new Trump administration would deal with Iran and a return to maximum-pressure sanctions may be on the table once again. With respect to international affairs, the new president is strongly aligned with Supreme Leader Ayatollah Ali Khamenei, and it is believed that nothing will change on this front in the near-to-medium term.
“Iran’s new president-elect Masoud Pezeshkian quickly announced the important relationship Iran has with China and Russia while referencing China’s role in brokering the peace deal with Saudi Arabia. He also said he is willing to work towards better relations with other countries (referencing the U.S.) and said he would not respond to pressure (referencing a potential Trump administration). China, Iran, Russia, and North Korea are forming a growing bloc to counter the U.S. with a new global order allowing Iran further independence from the West. The U.S. should expect China’s campaign, which includes Russia and Iran, to try to divide the European countries from the U.S. and leverage European relations with Iran as they are already doing with the Shanghai Cooperation Organization and the BRICS.” – General Robert Walsh
“The installation of a ‘reformist’ figurehead in Tehran is largely to appease the internal Iranian constituency. All meaningful external conversations will come from the Supreme Leader and his Council of Guardians. Iran funds its terrorist networks to the tune of just over $1 billion annually. Iran’s GDP is $413 billion. Iran could easily ramp up its terrorist support with the wealth it accumulates from selling oil to China in violation of sanctions. Restoration of deterrence is one method for shaping Iran’s decision-making regarding terrorist funding. Until that happens, Iran is free to use multiple levers to create new dilemmas for Israel. Hamas is an Iranian-resourced problem, as is Hezbollah, the Houthis, and the ‘turned’ Iraqi government.” – General Michael Groen
“Iran is in no hurry to widen the war with Israel. The Houthis have negatively impacted global shipping costs but to what end? At some point Tehran will demand that the Houthis stop their dangerous game. How much influence Tehran has can only be measured by political and monetary ‘top cover.’ China’s influence could be critical here. Beijing has directly benefited from the world order and has exercised its influence, over the years, in the Mideast. Pushing Tehran to reduce the Houthis’ behavior is in China’s interest both economically and diplomatically, and would reduce shipping costs in global markets. A clear win-win. Washington has no voice in Tehran and its regional influence is dangerously close to being equally muted. America and China have much in common; it’s time to acknowledge those similarities and fashion solutions that isolate Iran’s leadership to truly moderate its behavior and, significantly, the behavior of its proxies.” – General Spider Marks
“The new Iranian reformist President Pezeshkian was selected by the Supreme Leader to appease concerns over domestic unrest. Raisi’s death was a good thing for the Supreme Leader on the domestic front. Pezeshkian will execute foreign policy in line with the desires of the Supreme Leader and the Council of Guardians, both unelected entities. While the West watched the elections and is now looking for change, the only opportunity for change comes with the death of Ali Khamenei. I’d be looking for how the various candidates are jockeying to be the next Supreme Leader, though it’s an extremely low probability that there will be any change in overall direction even with the next Supreme Leader.” – General Robert Ashley
“The president of Iran is a domestically focused puppet for the Supreme Leader to use to work internal reforms. Expect no dialogue from the new president on external affairs. This past weekend’s attacks by the Houthis moved from shipping targets to Israeli homeland targets. We can continue to expect a vigorous response from Israel to attacks on their homeland. The Houthis are less responsive to Iran than Hezbollah but still require funding and weapons support. They can be a wild card played by Iran to attack Israel with plausible deniability internationally. They are growing stronger and present a growing threat in the region.” – General Frank Kearney
Russia Enhances its Partnerships to Support its War in Ukraine
As we addressed in our previous ATW, Putin has been taking steps over the past few months to reinforce his relationships with leaders friendly to Russia to help support his war in Ukraine. In June, he met with Kim in North Korea and executed a mutual defense agreement that included shipments of additional weapons to Russia for use in Ukraine. He also congratulated the new president of Iran and said that “I hope that your tenure as president will contribute to a reinforcement of constructive bilateral cooperation between our friendly peoples.” Finally, Putin also hosted Indian PM Modi in Moscow on July 9th and said that “our relationship (with India) is one of a particularly privileged strategic partnership.” While the U.S. has been making overtures to improve its relationship with India, Modi has avoided condemning Russia over its invasion of Ukraine and has increased its total volume of bilateral trade with Russia to over $65 billion, with the goal of raising that figure to over $100 billion by 2030. India currently gets more than 40% of its oil imports from Russia, which has supported Russia’s economy significantly following the international sanctions put on the country following the invasion of Ukraine.
However, all of these developments have been in the shadow of the recent NATO Summit this month, which celebrated the 75th anniversary of the founding of the alliance. At the summit, leaders of the member nations called for providing at least $43 billion in aid to Ukraine over the next year. In addition, Denmark and the Netherlands said that they have sent the first shipment of F-16 fighter jets to Ukraine, and the planes should be ready for combat later this summer. Germany will also establish a new command center to coordinate weapons shipments bound for Ukraine. Finally, the U.S. announced that it will begin to deploy weapons including Tomahawks, SM-6s, and hypersonic missiles to Germany in 2026. In response to actions like this as well as allowing Ukraine to hit targets inside of Russia (with U.S. weapons), there is intelligence that indicates that Russia could respond by supplying anti-ship missiles to the Houthi rebels for use against shipping in the region. However, Russia was not the only focus during the summit as the threat from China increases and Indo-Pacific security was a topic of discussion. Alliance members criticized China for being a “decisive enabler” of Russia’s war in Ukraine by supplying dual-use products. China and Russia responded by kicking off the “Joint Sea-2024” combined naval exercises together last week, which is yet another factor in the increasing tensions in the South China Sea.
“The U.S. and NATO’s biggest challenge in supporting the war in Ukraine is the lack of a strategy on how to help Ukraine win the war. Providing billions of dollars for weapons ‘for as long as it takes’ is not a strategy. President Zelensky’s strategy has a clear end-state and objective, but the U.S. and NATO have not adopted it nor attempted to influence it. This is a far cry from President Biden’s hands-on approach to Israel and the war in Gaza. The NATO Summit failed to provide the much-needed strategy while further enabling Putin’s psychological game that he can wait out NATO and win the war. It did pledge over 40 billion Euros which is also what the Europeans provided this year. There was no separate funding commitment from the U.S. and with a potential Trump administration, it will do little to deter Putin in thinking that the U.S. and NATO are not committed to winning beyond the current stalemate. The summit did not provide Ukraine specific security guarantees, but it did assure Ukraine that it is on an ‘irreversible path’ to NATO membership after the war ends.” – General Robert Walsh
“The combined military capability of NATO members far outstrips Russia’s capacity in both men and machines. If a broader swath of NATO understood the real nature of Putin’s ‘czarist’ threat, and were willing to resist Putin’s adventures, the situation could change quickly. Perhaps NATO members could learn from the past and find security in solidarity, which would relieve material support shortfalls to Ukraine. But even Ukraine has a lot of work to do to fight corruption internally as it continues its heroic resistance. Ukraine’s path to NATO will have to address past corrupt practices, but this is a community problem, not just a Ukrainian problem. In the meantime, the heroic defense by the Ukrainian military continues to inspire. Russia has not performed well on the ground because of its poor combat leadership and manifestly corrupt defense enterprise. Prigozhin was probably ‘correct’ when he ordered the Wagner Group to arrest the corrupt leaders of the Russian defense establishment. What is ‘right’ must fight to survive in an ecosystem of what is ‘possible’ or what is ‘easy’.” – General Michael Groen
“Ukraine of course gains a significant enabler with the addition of F-16s into the fight. However, Ukrainian pilots will not simply ‘fly;’ they must also ‘fight’ the F-16s. There are multiple mission sets where these aircraft can punish Russian forces and reduce overall Russian capacity to continue the offensive. The training to achieve that level of readiness and confidence has a significant time horizon. Additionally, Ukraine has not been able to dislocate Russian forces from Ukraine and give them no other option but to retreat back into Russia. That will only happen over time, possibly over several years, as Ukraine increases its ability to conduct operational level warfare, by connecting tactical victories in time and space.
NATO is still confused. While it publicly acknowledged that Ukraine should be a member, the conditions for membership are unclear. What is certain is that the war in Ukraine must have a sustained and monitored ceasefire before any membership discussion can progress. Terms of a possible ceasefire, however, are elusive.
Again, China has a role here. Russia is a vassal state of China, and an economic dwarf, increasingly with little in common with its autocratic neighbor. In fact, Moscow has become a distraction for Beijing. In Ukraine, China wins if Russia loses. So do NATO and the EU. Seems to me that there is an opportunity to figure out the methodology to make that happen.” – General Spider Marks
“From a ‘macro’ standpoint, driving some sort of peace deal makes sense. Stalemate seems to have become the status quo, especially as restrictions on what weaponry Ukraine gets or how they are able to use it only change when the need becomes necessary to maintain (more or less) the status quo. This has led me to think about what the ‘rebuilding’ might look like. As discussions have turned to that subject, a few thoughts keep coming to mind, all of which make me question the idea of ‘rebuilding’:
- Ukraine was not fully ‘built out’ before the invasion. Corruption remained an issue. In most Eastern European nations, as they tried to move from communism to capitalism, corruption, violence, and theft thrived. So, it might be more about ‘building’ than ‘rebuilding’ and we are going to have to be incredibly thoughtful about corruption.
- Many people I talk to point out how difficult it will be for Ukraine to get many of their people to return. Are they coming back? In addition, major cities like Lviv, far away from the fighting, face restrictions on electricity use as so much of the infrastructure has been damaged or destroyed.
- Finally, and this is the scariest, Ukrainians are saying one thing – ‘If you give Putin anything, he will be back for more!’ Why come back to rebuild something if he still plans on returning? Yes, certain things will be put in place to make that difficult, but once you have fed a bear, that bear will keep coming back for more. So, on the ‘macro side’ finding peace and moving on makes perfect sense, but it might be far more difficult that initially thought.” – Peter Tchir
Increased Tensions with China in the South China Sea
As we have addressed in previous ATWs, tension between China and both Taiwan and the Philippines has been increasing in recent months. Following the incident on June 17th that saw Chinese coast guard personnel ram a Philippine resupply ship heading to the Sierra Madre on the Second Thomas Shoal, China deployed a large coast guard ship to the vicinity. However, officials from both sides recently held talks and a deal was reached over the weekend to try to “manage the situation” and allow the Philippines to continue humanitarian resupply operations. However, China will require prior notification of all deliveries and demanded that the Philippines tow away the Sierra Madre. It is unclear if this “temporary arrangement” can be implemented, and we still believe that the stage is set for an incident that could escalate very quickly. In order to improve its own partnerships in the region, the Philippines signed a defense pact with Japan on July 8th that allows for “reciprocal access” to joint combat training. In addition to the Philippines voicing concern about China, in its annual defense white paper, Japan cited that China’s military ambitions present “the greatest strategic challenge to Japan and the world.” This agreement between Japan and the Philippines demonstrates that U.S. allies in the region are taking the initiative to form their own alliances following the U.S., Japan, and South Korea trilateral partnership that was announced last summer. We expect additional countries to discuss how they can partner with each other (as well as the U.S.) to counter Chinese influence in the region.
“A critical part of the NATO Summit was its focus on China’s support of Russia’s war effort. NATO expressed concerns with the growing China-Russia partnership and invited the Indo-Pacific countries of Australia, Japan, New Zealand, and South Korea to the summit. NATO called out China as ‘a decisive enabler of Russia’s war against Ukraine’ with their unfettered support of Putin’s war aims to take over Ukraine. This is a big step by NATO as it damages China’s reputation and further isolates Beijing from the West. Exacerbating the situation is China’s military involvement in a recent Belarusian military exercise near the Polish and Ukrainian borders. China’s actions demonstrate that Beijing is in full support of Russia’s military and its defense industrial base. Sanctions by European countries on Chinese companies involved in supporting Russia could be next. China aggressively pushed back against NATO’s objections by saying that NATO has no business creating instability in the Indo-Pacific region by including the four Indo-Pacific countries in the NATO summit.” – General Robert Walsh
“China will only provoke the Philippines and other small countries to the degree the U.S. and the international community will allow. When/if the Philippines calls out the U.S. regarding their mutual defense treaty, the U.S. administration’s response will be of enormous significance. To an extent, much of the CCP’s action is political theater for domestic consumption as China’s demographics, real estate market, and plan to export their way out of decline by surging into European and American markets is likely to fail. It is not just military might at play. China continues to message the ‘global south’ at the expense of the Western rules-based order. As long as this narrative is uncontested, the West will continue to fail to get traction in the emerging markets and with potential partners.” – General Michael Groen
“America must decouple Russia and China in our efforts to shape our policies. China has thrived as a direct result of the world order. It does not want to refashion the world in its image. China does not want to ‘liberate’ Taiwan by force. Taiwan’s largest trading partner is China. There are too many intersections between the U.S., Taiwan, the Philippines, and Japan to not recognize them. Russia, on the other hand, is in the process of trying to blow up the world order. It’s economy before the invasion of Ukraine was anemic and it’s now a ‘wartime’ economy with little desire for a reset. China has the political and economic levers to incentivize Russia to stop its war in Ukraine. America has the political, economic, and military levers to incentivize China to work in concert for this objective.” – General Spider Marks
“China will continue to be a topic of discussion for NATO, as it is continuing to provide Russia with dual-use technology to employ against Ukraine. Additionally, smaller Eastern European NATO countries are well aware of China’s attempts to disrupt Lithuania’s economy in response to Lithuania strengthening ties with Taiwan last year. China’s ongoing efforts to intimidate the Philippines and other Indo-Pacific countries using their military might tends to overshadow China’s ongoing efforts to exert economic and diplomatic pressure in Europe, with the goal of driving a wedge between the United States and NATO countries.” – General Mary O’Brien
“It will be interesting to watch how the India-Philippines relationship blossoms, as India recently delivered BrahMos anti-ship cruise missiles to the Philippines. The Philippines is also looking to buy more military hardware from India (aircraft and ships). This is the first exportation of the missile system by India and messages to China that if they sell weapons to Pakistan, India will sell weapons to their security partners. India is also building a security relationship with Vietnam now to assist them in their disputes with China.
All view China as a threat, and India is familiar with Chinese tactics as they have experienced them firsthand on their northern border. It is no surprise that India is also looking for a port in the South China Sea to counter the Chinese port in Sri Lanka, and recently sent ships to dock in Manila (a guided missile destroyer, a fleet tanker, and an anti-submarine warfare corvette). Additionally, for the first time, India established a military attaché in the Philippines. The U.S. has strengthened its relationship under President Marcos and now has access to nine military bases in the Philippines.” – General KK Chinn
