TRANSCRIPT
Sneak Peek
Dhruva Jaishankar: Essentially, this is a truce. This is a one-year trade truce between the United States and China. There's still a question. Markets are going to welcome this, but there's still a question about will this hold.
Rachel Rizzo: There is this principle of sovereign immunity which protects state assets from seizure by other countries. Otherwise, we'd be doing this all the time.
Dhruva Jaishankar: Venezuela has made claims to a very large section of neighboring Guyana. It's a region called Essequibo, because it's a sparsely populated and oil-rich region. And if you look on a map, it's a pretty big chunk of the country.
Rachel Rizzo: Mm-hmm.
Welcome to Around the World
Dhruva Jaishankar: Hi, I'm Dhruva Jaishankar.
Rachel Rizzo: And I'm Rachel Rizzo. Welcome to the Around the World podcast. Your essential guide to understanding the forces shaping our world today. Every week, we cut through the noise to bring you clear, insightful analysis of the most important developments in geopolitics.
Dhruva Jaishankar: Whether it's security challenges across Europe, shifting power dynamics in Asia, domestic updates from the United States, or regional updates from Latin America or the Middle East, we make sure you're up to speed on what's happening and more importantly, why it matters.
Rachel Rizzo: Thanks for tuning in.
Rachel Rizzo: Dhruva, happy Friday. How was your week?
Dhruva Jaishankar: Happy Friday. Interesting, good. We had a conference on US-China relations this week. A lot happening around the world, so a pretty eventful week.
Rachel Rizzo: Yeah, as we said last week, it's Newsy, Newsy as usual. On the topic of Asia, that is one of the topics we are going to be chatting about today. We have a full docket. We're going to chat about Trump's Asia trip. We are going to talk about what is going on with these discussions about frozen Russian assets in Europe. We kind of mentioned this on the show last week, so we'll do a little bit more of a deep dive today. And then we are going to go down to South America and talk about what is happening with the US and Venezuela.
Dhruva Jaishankar: Yeah, yes.
Trump's Asia TRIP
Rachel Rizzo: So to get us started, let us start in the Indo-Pacific region. Trump, big Asia trip. What have you been watching? Is there a deal? What should we be looking at here?
Dhruva Jaishankar: Yeah, so US President Donald Trump went to Asia this week, his first major trip to Asia in his second term. The stops included Malaysia, Kuala Lumpur, for the ASEAN and East Asia Summit meetings. He oversaw the agreement between Thailand and Cambodia. There had been fighting between the two countries. This is actually a case where ASEAN, an organization that has been in for lot of criticism, actually helped broker an agreement at the end, but the United States, Trump wants to see himself again as the peacemaker. And so there was a little bit of like, well, let's pretend to give him some greater credit than is perhaps due for this. The original agreement was signed a little while ago in the presence of Chinese and US officials. Certainly, so that was one thing there. Then he goes to Japan. The Japanese lay out the red carpet for him. It's his first meeting with the new prime minister of Japan, Sanae Takaichi.
Rachel Rizzo: Okay. Yep.
Dhruva Jaishankar: We spoke about this a little bit last week that this was going be a test for her, it seemed to have really rolled out the red carpet for him. He seemed really pleased. They did a deal on rare earths, which seems to be kind of a standard practice nowadays in all of Trump's negotiations. But then what everyone was paying attention to was him going for this APEC summit to Seoul, to South Korea. And this is the first meeting of Trump and Xi Jinping, China's leader, in Trump's second term, first face-to-face meeting. They've spoken on the phone before.
Dhruva Jaishankar: And what everyone was looking for was, was there going to be a trade deal between the United States and China, the world's two largest economies.
Rachel Rizzo: Mm-hmm. Okay.
Dhruva Jaishankar: At periods of time, they had over 140 % tariffs on Chinese goods to the United States earlier this year. They've since come down.
Rachel Rizzo: That's all we've been talking about it seems like.
Dhruva Jaishankar: Yeah. So the short version is we got a ceasfire.
Rachel Rizzo: On trade you mean?
Dhruva Jaishankar: Yes we got a U.S.-China ceasefire on trade when Xi and Trump met. This was hammered out by negotiators in Kuala Lumpur just a few days before the meet. Now, a few things. Briefly, what the US gets and what Trump gets out of this is a resumption by China, a commitment to resume rare earth magnet exports.
Rachel Rizzo: Ok.
Dhruva Jaishankar: And to crack down on fentanyl and a commitment to buy soybeans and other agricultural products from the United States. Now, these are all important because these really advance, the rare earths are really needed at this point. China has the United States over a barrel on that issue. But the others are kind of more politically oriented. Before the midterms next year, Trump wants to make sure that there's an increase in exports of American agricultural goods because that matters. China in turn gets tariffs reduced a little bit to about 47%, I think we're looking at. So the fentanyl tax essentially, 20%, has been dropped to 10%.
Rachel Rizzo: Ok.
Dhruva Jaishankar: And a delay on American export restrictions. And possibly, although there's some mixed reporting coming out now, continued access to advanced AI chips. So this is kind of what both sides get out of the deal. A few things though to keep in mind. Nothing as yet has been signed.
Rachel Rizzo: Oh it hasn't. So we're still waiting for...
Dhruva Jaishankar: No. They've announced an agreement, but so far no pen to paper. Again, this may change in the next few hours or days.
Rachel Rizzo: Okay, could there be some changes in between the discussion and what's signed?
Dhruva Jaishankar It's unclear why, but we'll see. Nothing has been signed yet, again, as of this recording but that could change. But essentially, this is a truce. This is a one-year trade truce between the United States and China. there's still question. Markets are going to welcome this, but there's still a question about will this hold? And we've seen, again, evidence, whether it's with the US and Canada or others, where some of these things, or the US and China in 2017, where some of these agreements haven't really held. Both are going to try and seek advantages in these few areas over the next year as well.
Rachel Rizzo: So Trump went to the Indo-Pacific, obviously the meeting with the new Japanese Prime Minister was on the top of the agenda, obviously this meeting with Xi. One term I did not hear you use in this discussion was the Quad. Was there anything, any discussion on the Quad during this visit or is that sort of maybe for other times, other issues, other people?
Dhruva Jaishankar: I think that's a good question. I think it remains to be seen. There was an opportunity. India is not a member of APEC.
Rachel Rizzo: There you go, okay.
Dhruva Jaishankar: Last year, the Commerce Minister participated in the APEC summit, but India is not a regular attendee. The occasion that would have been the occasion is the East Asia Summit in Malaysia. And India's Prime Minister Modi decided not to go, partly because there hadn't been sufficient progress on a US-India trade deal.
Rachel Rizzo: That makes sense. Okay.
Dhruva Jaishankar: So you had the Japanese Auralian U.S. leaders there, but no Indian. And so there was no opportunity for a Quad, like a side meeting, which in the past, it would have been something like that quite possibly. There's some talk, mean, Prime Minister Modi did speak to the Japanese Prime Minister a couple of days ago, and in the Japanese readout, they mentioned the Quad as well. There's some talk about a meeting in India in early 2026. But again, it'll come down to whether there's progress on a trade deal, whether their political appetite is there and whether schedules align.
Rachel Rizzo: Okay, so we'll watch this closely and we'll probably do a deep dive at some point.
Dhruva Jaishankar: One small thing that's happening though, there is a US-India Air Force exercise and at least it's been reported that Japanese and Australian participants will be there. So it's kind of a quad air force exercise that may happen next week or in two weeks time.
Rachel Rizzo: Yeah. Where? Where's that?
Dhruva Jaishankar: I think it'll be in India this time, Cope India exercises. So again, there's some sort of very regular stuff happening, day-to-day stuff happening between the militaries, the foreign ministries, the four governments. But there's not yet a summit in sight, possibly early 2026.
Rachel Rizzo: Yeah. Yeah.Okay, good to know. We'll keep our eye on it.
Frozen Russian Assets
Dhruva Jaishankar: Moving a little bit to Europe. So after Russia's invasion of Ukraine in 2022, there was this question of Russian central bank reserves that were in European banks.
Rachel Rizzo: Yeah. Yeah.
Dhruva Jaishankar: And there's been this ongoing debate about what to do about it. So maybe start talking, talk us through where that debate stands right now and what might change.
Rachel Rizzo: Yeah, absolutely. So for anyone listening who has been following the ongoing war between Russia and Ukraine and maybe how the U.S. and Europe can keep supporting Ukraine, you have definitely heard about the potential to use frozen Russian assets to support the Ukrainians. And I think it deserves a little bit of a breakdown because it's kind of a confusing financial mechanism. So after Russia's invasion in February of 2022, Western countries went ahead and froze about $300 billion worth of Russian central bank reserves. 185 billion euros of these are held at what's called EuroClear, and this is a Belgium-based central securities deposit. And in early 2024, you had the G7 countries finalize a $50 billion loan to Ukraine, and this was backed by interest generated from the frozen assets. You kept hearing these words, this phrase, windfall profits. And so that was that discussion about a year and a half ago. But interest payments are declining, which means that you can't get as much money from them anymore. And Ukraine still needs funding. So the question is, you have 185 billion euros sitting in this Belgian bank, sitting in Euroclear. Can the EU use this in some way to support Ukraine?
Dhruva Jaishankar: So that is the question, can they use this in some way? And so can they?
Rachel Rizzo: It's super complicated. European Commission President Ursula von der Leyen, she proposed what they're calling a reparations loan of up to 140 billion euros that would basically use the frozen Russian assets as collateral rather than relying on the actual assets. And so they're not gonna use the actual assets and there are reasons for that.
Dhruva Jaishankar: So what are some of the reasons?
Rachel Rizzo: So under international law, a sovereign country's assets can't just simply be confiscated. There is this principle of sovereign immunity which protects state assets from seizure by other countries. Otherwise, we'd be doing this all the time. Markets would be a mess. It would undermine the international financial system, risk retaliation, create legal problems. So the EU, what they're doing, they've had to find a workaround to this.
Dhruva Jaishankar: So what's the workaround?
Rachel Rizzo: So basically the plan as of now is that the EU would lend Ukraine up to 140 billion euros at 0% interest. And this would only need to be repaid by Ukraine if Russia pays Ukraine reparations. So we have sort of a triangular financial trick going on there, sort of a round robin as we used to call it in the finance industry. The loan would be guaranteed by the EU's next long-term budget or by individual member states. So they can give the Ukrainians the loan and if Russia doesn't pay reparations, which I don't think it is anytime soon, the loan is guaranteed by European funds. Obviously, because EuroClear is based in Belgium, Belgium has been super on the fence about this. They want guarantees that the risk is going to be shared with other European countries. And obviously national parliaments are going to need to agree on this, which makes it pretty complicated. So what we're now looking at, you had the EU Council Summit last week where they discussed this. They punted it until the next EU Council Summit in December. And at that point, they will discuss it further. They'll talk about what's feasible. And then hopefully we will have a clear answer by early 2026. But something that is not going to be solved in the next couple of weeks or couple of months. I think we're looking at a pretty long-term discussion here.
Dhruva Jaishankar: So we're looking at some pretty complicated and layered financial kind of mechanisms that are being used to generate so without actually touching the reserves because it's a sovereign issue. But I was talking to some Belgian officials a few weeks ago and they said one of the other concerns is just like they're worried about the precedent it might set, right?
Rachel Rizzo: Totally yeah.
Dhruva Jaishankar: And that basically Europe as a whole and Belgium in particular would lose some of its credibility. And this is in their view that it would lose its credibility as a financial, a trusted financial partner essentially. And so how much do think that that sort of stuff will weigh?
Rachel Rizzo: I think it weighs hugely on not only the Belgians, but other European countries as well. When you set precedent like this, it means that when you seize another country's assets, no assets are safe. And as I sort of mentioned before, we don't know what that would mean for European or for international financial markets, but it would certainly undermine them. So this is sort of a way to get around confiscating the actual assets, but using them in a way that is sort of financially mechanized and creative so that the Europeans aren't actually seizing the assets. My colleague actually at the Atlantic Council, Charles Litchfield, he's in our geo-economics team, he's super interesting on this, worth reading if you haven't. But as I mentioned, we will watch this closely and give you all updates as they come available.
Tensions in Venezuela and U.S. Involvement
Rachel Rizzo: And so on that, kind of wrapping up, wrapping up our round robin of a discussion, heading down to South America. The other thing that you've probably been paying attention to, if you've been watching the news here in the US, is the fact that we seem to be going down to Venezuela and bombing boats or shooting boats down. Can you tell us what's going on down there so that we have, I'm not even sure what's going on.
Dhruva Jaishankar: A little bit. And with the caveat that this is not an area I follow that closely, but it has some interesting spillover effects in others, which is partly why it is of interest to people who don't follow the region. Essentially, the Western Hemisphere at writ large has been a central focus of the second Trump administration. One thing there's actually been some consistency about there is that the senior Trump administration officials have focused a lot on the Western Hemisphere.
Dhruva Jaishankar: Whether it was sort of on concerns about the Panama Canal or Greenland early on and some of the statements that came out on that. But whether it's Marco Rubio himself, who is the Secretary of State, Chris Landau, the Deputy Secretary State, is a former ambassador to Mexico. This is a very Latin America-heavy focused administration. Now, one thing they've done is using the US military to do these strikes against targets, boats, which are carrying they say are carrying drugs, weapons and other illicit activity.
Rachel Rizzo: Yeah.
Dhruva Jaishankar: There have been at least 10 strikes on vessels embarking from Venezuela and Colombia, and that has led to casualties. And it's led to questions about how much of this is a Coast Guard issue, how much of this is a US military issue. So that’s really, we've seen a drumbeat of that building up. Last week, exactly a week ago, Trump ordered aircraft carrier battle group to Gerald Ford to actually go off Venezuela.
Rachel Rizzo: That’s a pretty big deal. Yeah.
Dhruva Jaishankar: That scene is sort of escalation because the Carrier Battle Group is like a floating military base. I mean its huge.
Rachel Rizzo: Yeah, I mean it's huge, yeah.
Dhruva Jaishankar: Yeah and with all the support around it. So a lot of it, the ostensible reason is to counter this, there's much more going on.
Rachel Rizzo: So it's not just about drugs. I mean, there's something obviously bigger going on here.
Dhruva Jaishankar: Yeah, a little bit background. So Venezuela in particular, Venezuela is sitting on the largest proven oil reserves of any country. It's massive, more than Saudi Arabia. And for many years it was led by Hugo Chavez, who is a sort of charismatic, sort of left-leaning populist leader. And it's just interesting to see, Venezuela a while ago was the richest country in South America per capita. It is now one of the poorest countries. And it's really a testament to the economic mismanagement of that country.
Rachel Rizzo: Wow.
Dhruva Jaishankar: It's led to a big outflow of migrants, many of whom have come to the United States. Venezuelan Americans, like Cuban Americans, tend to be pretty right-wing and supportive of the Republican Party. There's a domestic political component to it here in the United States as well. There's been this migration outflow. It has been tied into this war on drugs as well, although that's mostly been focused on Colombia. There's been this issue about whether Chavez who was succeeded by his vice president Maduro, who is now the leader and has been for some time now, successive U.S. governments have to different degrees supported opposition leaders and opposition parties to the Chavez regime, including inviting them to United States. At one of the State of the Union addresses you had Juan Guaidó, who was at that time the opposition leader. You had another opposition leader, María Corina Machado, win the Nobel Peace Prize this year that drew more attention to that.
Rachel Rizzo: Yeah.
Dhruva Jaishankar: So there's been this disputed election last year, a sizable opposition movement, and yet that has remained. So the real question that is on people's mind is, this really aggressive steps towards some kind of regime change or attempt at bringing toppling the Maduro government there?
Rachel Rizzo: Yeah, it kind of seems like everyone's wondering if we're going to try to do a coup, which goes against the peace-loving president that Donald Trump and his team have said that they are. I don't think that's, you know, that's not what I think is happening here. But it's a really big question on people's minds, it seems like.
Dhruva Jaishankar: Yeah, I think this is part of a trend that we're going to see of, in some ways, geopolitics returning to Latin America after a sort of 25, 30 year hiatus, really since the end of the Cold War. And there are a few layers to this. One, China is playing a bigger role.
Rachel Rizzo: Huge roll. Yep.
Dhruva Jaishankar: They've invested in Peru. Many countries in Latin America don't see China as a geopolitical challenge in the way that many in Asia and Europe do. It's going to be mostly on economic issues. The politics has become very polarized in Latin America. So you have these right-wing leaders like Milei in Argentina, Bukele in El Salvador, who tie their political fortunes quite closely to a self-Trumpist movement in the United States. And then you have the opposite of that. So Lula in Brazil, he's worried about the resurgence of Bolsonaro, who is seen as a self-Trumpist-like figure. So this kind of interesting set of alliances, if you will, political alliances is also emerging in Latin America with political parties in each country, arrayed on both sides of that divide. And then a couple of other interesting things changing this up. Venezuela has made claims to a very large section of neighboring Guyana. It's a region called Essequibo, because it's a sparsely populated and oil-rich region. And if you look on a map, it's a pretty big chunk of the country. And that's led to, Guyana is now a new oil exporter, a major oil exporter. suddenly again, you've had this geopolitical tensions coming in. Weirdly, Guyana has a very large Indian population.
Rachel Rizzo: Oh interesting.
Dhruva Jaishankar: Yeah, about more than 30 % of the current leader is of Indian origin. So there's now been this sort of, again, the interesting geopolitics of this, where countries are backing one side or the other. There are other countries, including the Caribbean, who are trying to broker an agreement between Guyana and Venezuela on this. So it is heating up in a slow way and a place to watch over the next few years, but has become a pretty central focus of the Trump administration.
Rachel Rizzo: And then just to close on that, what are you going to be looking at next in terms of how the United States is approaching this? It's obviously a priority for Rubio. What's he doing? Who else is looking at this closely?
Dhruva Jaishankar: So it is there. Again, let's see where this goes. And again, it's being caught in a combination of domestic political divisions, both in the United States and across Latin America, also again, the geopolitical. But you know strange things are happening. So in the middle of all of this, early in January, Rick Grinnell, who is Trump's special envoy for a multitude of issues, he actually flew in, I think, in late January, early February to Venezuela, negotiated the release of some Americans there, and met with Maduro personally. So again, all of that is happening at the same time as there seem to be these attempts at the very least sort of pushing back very aggressively on the Maduro government.
Rachel Rizzo: Okay, gosh, Rick Grinnell, super interesting character, former Trump ambassador to Germany. He's been all over the place, someone to watch closely. And obviously, you know, we'll be keeping an eye on all of these developments and we'll make sure we're keeping you, our listeners, up to date on the latest happenings in geopolitics. Be sure to tune in every Friday for the latest episodes and as I mentioned in our intro, like and subscribe to our podcast both on Spotify and on YouTube
Dhruva Jaishankar: As always, thank you for joining us on the Around the World podcast and we'll see you next week.
Rachel Rizzo: See you.
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