Asian Insider, May 8: Iran runs out of patience

Asian Insider brings you insights into a fast-changing region from our network of correspondents.

IRAN’S ULTIMATUM

Iranian President Hassan Rouhani notified European nations that he would give them 60 days to choose between following President Trump or saving the nuclear deal by engaging in oil trade with Iran in violation of American unilateral sanctions. Starting on Wednesday, he said in a widely anticipated speech, Iran would begin to build up its stockpiles of low enriched uranium and of heavy water, which is used in nuclear reactors.  Should Europe fail to compensate for the unilateral American sanctions, he said, Iran will resume construction of the Arak nuclear reactor, a facility that was shut down under the deal.

The tough message from Teheran comes as the United States deployed a second aircraft carrier strike group to the West Asian region, citing threats from Iran. While the perceived threats likely arise from intelligence reports about the speech Mr Rouhani delivered our US Bureau Chief Nirmal Ghosh says the developments have caused alarm in policy circles in Washington who fear that an increasingly toe-to-toe confrontation with Iran could well lead to a miscalculation.

Larger questions loom, however, over the Trump administration's particular brand of "peace through strength" - or what some analysts are calling "coercive" diplomacy - and its inherent risks, he says. 

Take a read here: America's gunboat diplomacy risks war

US-CHINA TENSIONS

Very few issues irritate China as much as moves seen to promote Taiwan’s independence. On Tuesday, amid the trade tensions that have roiled their bilateral ties, the US House of Representatives unanimously backed legislation supporting Taiwan which faces military and diplomatic pressure from China. As members of the US Congress push for a sharper approach to relations with Beijing, the House passed the measures 414-0. 

Wire reports said the non-binding resolution reaffirms the US commitment to Taiwan.

The House also backed by unanimous voice vote the "Taiwan Assurance Act of 2019," which supports Taiwan and urges it to increase its defence spending, noting Washington should conduct "regular sales and defence articles" to Taiwan.

There was no word on when the Assurance Act might come up for a vote in the Senate, which would be necessary before it could become law. China said on Tuesday that China's Vice Premier Liu He, would travel to Washington for talks this week, setting up a last-ditch bid for a deal that would avoid a steep increase in tariffs ordered by US President Donald Trump.

Meanwhile, says China Correspondent Lim Yan Liang, China’s top trade negotiator is heading to the US to resume talks

That didn’t assuage Asian markets,  where a red wave swept across Asia trading floors on Wednesday as investors grow increasingly concerned that the China-US trade deal, which appeared all by ready to sign, could fall through. 

See here: Asia stocks extend global slide as US-China trade fears grow   

NAJIB’S STASH

A year ago this week, Malaysia’s Prime Minister Najib Razak was ousted from office and the ruling UMNO suffered unprecedented defeat. Now, two civil forfeiture suits have been filed by the government and the police against the former prime minister, his wife Rosmah Mansor and several others to seize RM711 million (US$171 million) worth of items, which were allegedly bought using 1Malaysia Development Berhad (1MDB) funds.

Financial publication The Edge reported that there were two notices of motion and supporting affidavits that were filed in the High Court in Kuala Lumpur on Tuesday to seize items including jewellery, cash, handbags and luxury vehicles from these individuals.

It added that the first notice of motion was to seize a property in the Klang Valley, cash which includes foreign currencies, jewellery, handbags, watches and sunglasses worth RM680 million. The report also said the second notice of motion was to seize 27 luxury cars, cash which includes foreign currencies, 29 bank accounts, watches and bags totalling RM31 million.

SINGAPORE’S CENTRAL BANK

Monetary Authority of Singapore, the country’s central  bank, has always been careful to ensure that the data that flows from it do not compromise its effectiveness to be watchdog and watch tower for the local economy. On Wednesday, it revealed a little about its monetary operations, announcing the transfer of S$45 billion from the official foreign reserves (OFR) to sovereign wealth fund GIC, for longer-term investment.

MAS said this amount is the "excess" over what it deems necessary to maintain confidence in Singapore's exchange rate-centred monetary policy and does not imply any reduction in Singapore's total foreign reserves. MAS manages the country’s OFR, which stood at S$404 billion as at April 2019.

The Singapore central bank said it will disclose data on its foreign exchange (forex) intervention operations, which comprise MAS' net purchases of forex on a six-month aggregated basis, with a six-month lag from the end of the period. Thus, the data would be released on a six-monthly basis and will begin with data for the second half of 2019. This works out to the first release date coming in July 2020.

OTHER DEVELOPMENTS

Thailand's Election Commission (EC) has endorsed the majority of results in the March 24 national ballot, but warned that it was still investigating allegations of wrongdoing that might affect the final tally. Indochina Bureau Chief Tan Hui Yee says EC deputy secretary-general Sawang Boonmee announced that the commission confirmed the results for 349 out of 350 constituencies that were contested.

China's exports dropped 2.7 per cent in April, while imports expanded by 4 per cent last month, leaving a trade surplus of US$13.84 billion, the customs administration said Wednesday. Economists had forecast that exports would tick up by 3 per cent while imports would slip by 2.1 per cent.

New Zealand's central bank cut its benchmark interest rate for the first time in two-and-a-half years on Wednesday as it looks to support a cooling economy and counter global uncertainties, sending the country's currency to a six-month low.
The Reserve Bank of New Zealand cut the official cash rate (OCR) by 25 basis point to a record low of 1.5 per cent, a move that followed its shift in March to an explicitly dovish footing.

Japan said it had recovered some debris from a high tech F35-A stealth fighter jet that crashed in April, but was still looking for the "all-important" memory that could offer clues into the accident. Nearly a month after the plane plummeted into the sea off the coast of northeastern Japan, neither the pilot's body, nor the plane's fuselage have been found, said Defence Minister Takeshi Iwaya. Experts say Japan and the United States are keen to prevent debris from the plane being recovered by Russia or China, 

Insider will be back tomorrow.

Meanwhile, seize the day!

Ravi