Bloomberg Balance of Power - August 29, 2024 -chaos in Libya, Indonesia and more....

 

Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up here. The stalemate over who runs Libya’s central bank encapsulates the chaos engulfing the North African nation. The confrontation between the OPEC member state’s two rival governments has also triggered an order to halt production of the country’s daily oil output of around 1 million barrels. And it shows a Libyan roadmap brokered by the United Nations to try to restore stability since 2015 following the overthrow of Moammar Al Qaddafi may no longer be working. The US, European and Arab governments that helped Libyans oust their tyrannical ruler in 2011 are now focused on two major wars: Russia invading Ukraine and Israel fighting Hamas in Gaza. At home, they’re consumed by the battle against inflation and the rising cost of living following the once-in-a-century pandemic that bashed their economies. Europeans are primarily concerned with preventing migration from North Africa and the US with limiting the spread of extremists. They have little time or bandwidth to devote to a fragmented and chaotic Libya, though that might change if the oil shutdowns push up global prices. WATCH: Bloomberg’s Anthony Di Paola discusses what’s at stake for the Libyan oil industry. Source: Bloomberg TV The failure to reach a lasting resolution has its roots in how dysfunctional state institutions became during Qaddafi’s 42-year rule. After 2011, institutions became a manifestation of the conflict rather than active participants in state-building, and the vacuum was filled by myriad militias. Rebuilding Libya needed deep legal, economic and security-sector reform, whereas the UN-brokered process prioritized putting together a nominal unified government, with each side sitting on their own set of agendas, beliefs, laws and even constitutions and outside backers. Any roadmap was built on fragile foundations, sometimes creating massive jams from even simple matters. While it mostly rescued Libya from free-fall, the UN wasn’t successful in drafting a constitutional text. In its absence, Libya remains volatile.— Salma El Wardany

Global Must Reads

Top White House official Jake Sullivan began his first one-on-one talks with Chinese President Xi Jinping today, as both sides seek to stabilize ties ahead of the US election in November. President Joe Biden’s national-security adviser sat down with Xi in Beijing, hours after emerging from a rare meeting with a top Chinese army general that he’d called “very important” for conflict management. WATCH: Sullivan held talks with Zhang Youxia, vice chairman of China’s Central Military Commission. Source: APTN United Nations Secretary-General António Guterres urged Israel to halt military operations against alleged terrorists in the West Bank, while the US imposed sanctions on a group that supports Israeli farmers in the occupied territory and condemned what it called “extreme” violence against Palestinian civilians. Prime Minister Benjamin Netanyahu’s government depends on support from hardliners who champion the settlements. Telegram is increasingly viewed in Europe by users and governments as a swamp filled with hate speech and illegal wares. In Russia, everybody from top Kremlin apparatchiks to Vladimir Putin’s harshest critics say the messaging service — whose founder Pavel Durov was charged in France yesterday — is both that as well as the best source of uncensored information. Britain’s new Labour government has been urged to stick to its plan for higher taxes on wealth, even as business groups and advisers to the rich call for restraint. Tax hikes would reduce steep inequalities between different parts of the UK, according to a new report from the Institute for Public Policy Research, a left-leaning think tank with a history of influencing the Labour Party. Brazilian President Luiz Inacio Lula da Silva chose ally Gabriel Galipolo as the next central bank chief, cementing the head of state’s influence over an institution he has criticized for keeping interest rates high. This month, policymakers unanimously said they won’t hesitate to raise rates if needed, clashing with Lula’s demands for borrowing-cost cuts to help spur economic growth. China’s top energy officials downplayed growing speculation that the country’s carbon emissions have already peaked years ahead of target, saying that just meeting the goal on time still required “great efforts.” A Hong Kong court found two former editors guilty of publishing articles about pro-democracy activists that were deemed seditious, convicting journalists of such charges for the first time in decades in a move likely to deepen concerns around press freedom. South Korean President Yoon Suk Yeol outlined planned reforms of the pension, medical, education and labor sectors, calling the overhauls a difficult task that’s essential for the survival of the country. Support in Sri Lanka for a candidate with roots in Marxism is gaining momentum ahead of next month’s presidential election, with Anura Kumara Dissanayake, popularly known as AKD, sending a strong message about combating corruption and scrutinizing investment deals with China to avoid another debt trap.

Washington Dispatch

Ahead of publication tomorrow of the Federal Reserve’s preferred gauge of underlying inflation — the personal consumption expenditures price index — the central bank already seems set on a course of lowering interest rates beginning next month. At the same time, their comments suggest US monetary policymakers prefer a cautious approach. At their annual retreat in Jackson Hole, Wyoming, last week, some Fed officials made the case for cutting rates in a “gradual” or “methodical” manner. Inflation hasn’t yet fully cooled to their 2% target, they argued. Although the labor market is showing signs of fragility, the absence of widespread layoffs means aggressive action isn’t yet required. In his closely watched speech in Jackson Hole, Fed Chair Jerome Powell gave no indication as to the pace of rate reductions he expects after September’s initial cut. He also sounded more open than several of his colleagues to taking a more active approach should things deteriorate rapidly on the employment front. Two people to watch today: Vice President Kamala Harris and her running mate, Minnesota Governor Tim Walz, continue a bus tour of Georgia. Their CNN interview will be broadcast tonight. Sign up for the Washington Edition newsletter for more from the US capital and watch Balance of Power at 1 and 5 p.m. ET weekdays on Bloomberg Television.

Chart of the Day

China’s annual growth target of 5% is looking increasingly out of reach, with UBS adding to a string of forecast cuts as consumer spending slows and Xi’s government eschews major stimulus. With momentum also held back by a real-estate downturn and tight fiscal policy, the Swiss bank now expects the world’s No. 2 economy to expand 4.6% this year — trimming an earlier forecast of 4.9%. China last missed its growth target in 2022, when Covid lockdowns helped make the goal unattainable.

And Finally

Lebanon has been waiting for war since October, when Iran-backed militant group Hezbollah began targeting Israel because of the conflict in Gaza. The two sides have been trading fire along the border, exchanges that could spiral into a bigger, broader battle involving global as well as regional powers. But for many in the capital Beirut, recent events have just been the latest version of normality. Sunbathers at Beirut’s Ain al-Mreisseh seaside promenade on Aug. 2. Photographer: Joseph Eid/AFP/Getty Images

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