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Stoltenberg on the Arctic: Strategic for NATO

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NATO Secretary General Jens Stoltenberg will visit Canada and Canadian Arctic with an agenda for Ukraine, climate change, and Arctic defence. The tour is particularly noteworthy as it represents the first visit by a NATO secretary general to the Canadian Arctic since NATO was founded in 1949.

Canada, the second largest border state in the region after Russia, has long opposed NATO involvement in the Arctic, which included even vetoing a statement on the Alliance’s role in the Arctic during a major summit in 2009. There are various opinions on the reasons why. There are those who are concerned about militarizing the Arctic and provoking Russia, as well as those who do not want non-North Alliance members such as Italy and Spain to have a say in the Arctic. But Canada wants to preserve its essentially exclusive economic territory. Moreover, the sea ice has been melting in the Northwest passage through Canadian Arctic due to climate change, and it will potentially be fully open and navigable by 2040. This means changes in routes and marine traffic in international waters. There are those who do not want to share this advantage, as well as those who argue that this will create new security requirements and thus increase the need for the Alliance.

However, the US is trying to completely change Canada’s attitude by using the Ukrainian war and the existence of Russia and China as an excuse. 

Andrea Charron, an expert on North American security at the University of Manitoba, spoke to Canadian press about Stoltenberg’s visit: “It’s more of a sign of continued solidarity between NATO’s members as opposed to an actual signal that they are opening the door to NATO exercises in the Canadian Arctic.”

For some, the visit represents an easing of past reluctance to work with NATO on the Arctic.

NATO seeks to improve its defence against China and Russia in North America and expand its position in the Arctic. Finland and Sweden’s integration into NATO is also important in the Arctic context.

‘Russia and China Threats’

Just before his visit to Canada, the NATO Secretary General wrote an article underlining the Alliance’s Arctic defence policy.

Stoltenberg underlined the region’s strategic importance for Euro-Atlantic security and noted that the shortest path to North America for Russian missiles would be over the North Pole.

Stoltenberg stressed that the North Pole will be rapidly ice-free due to climate change, and this will unlock opportunities for shipping routes, natural resources, and economic development, also pointed out Russia and China for increasing the risk of tension.

Stoltenberg note that Russia has significantly increased its military activities in recent years and set up a new Arctic Command, describing Russia’s activities as a “strategic challenge” to the Alliance.

China has declared itself as a ‘near-Arctic state’ and “is expanding its reach by planning a “Polar Silk Road” linking Beijing to Europe via the Arctic, it is rapidly strengthening its navy, with plans to build the world’s biggest icebreaker vessel. China is also investing tens of billions of dollars in energy, infrastructure and research projects in the region” told the NATO Secretary General.

“Earlier this year, Beijing and Moscow pledged to intensify practical co-operation in the Arctic, as part of a deepening strategic partnership that challenges our values and interests,” Stoltenberg said, citing Beijing and Moscow’s collaboration.

‘Finland and Sweden’s membership is critical for the region’

Describing the Arctic as the “the gateway to the North Atlantic, hosting vital trade, transport and communication links between North America and Europe” Stoltenberg said: “Once Finland and Sweden join the Alliance, seven out of the eight Arctic states (Russia, the United States, Denmark, Canada, Norway, Sweden, Finland, Iceland) will be members of NATO. Finland and Sweden’s membership will significantly enhance our posture in the High North and our ability to reinforce our Baltic Allies.”

Arctic geopolitics appears to be at the heart of Sweden’s and Finland’s insistence on NATO membership.

Stoltenberg signs that NATO will secure and militarize the Arctic region, citing it as one of the key areas of competition with China and Russia. NATO, which declared China and Russia a threat at the ‘historic summit’ in Madrid, considers the cooperation of both countries a threat to their interests. In his article, Stoltenberg highlights Beijing-Moscow cooperation in the Arctic, presenting the Alliance to North America as a security need for the Arctic.

Time will tell whether Canada, which has so far opposed the Arctic becoming a NATO agenda, will resist this further after NATO Secretary General’s visit.

Geopolitics of the Arctic

Increasing interest in the Arctic basin stems from the potential for new hydrocarbon and mineral reserves, sea transport routes and fishing in the region soon as glaciers melt due to climate change.

The United States, which stands out with its 48 trillion cubic meters of natural gas and 90 billion barrels of oil reserves, also sees the region as geostrategic in terms of surrounding Russia. By contrast, a new maritime doctrine signed by Putin explicitly challenges Russia being surrounded through the Arctic Ocean. Pointing out that the Arctic waters are a concern of Russia’s national interests in the new doctrine, Putin emphasized that “We will ensure their [Arctic waters] protection firmly and by all means”. The northern route began to gain importance as part of Beijing’s “New Silk Road” project. Because the opening of the Arctic due to melting glaciers will dramatically shorten the distance between Asia and Europe and create new commercial opportunities for China.

With its location and energy resources, the Arctic region is likely to become more prominent as one of the new areas of competition between NATO and Russia-China forces.

AMERICA

Fed cuts interest rates, dollar surges to two-year high

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The U.S. Federal Reserve reduced interest rates by a quarter percentage point but signaled a slower pace of easing next year. This move drove the U.S. dollar to its highest level in two years and triggered a sell-off in both domestic and international stock markets.

The Federal Open Market Committee (FOMC) voted on Wednesday to lower the benchmark interest rate to 4.25–4.5%, marking the third consecutive cut. The lone dissenting vote came from Cleveland Fed President Beth Hammack, who favored maintaining the current rates.

Officials highlighted concerns about persistent inflation, projecting fewer rate cuts for 2025 than previously expected. Reflecting these worries, policymakers also raised their inflation forecasts for the coming year. Following the announcement, Fed Chair Jay Powell remarked that the current policy settings were “significantly less restrictive,” indicating the Fed’s inclination to adopt a more cautious approach to further easing.

“This decision was a ‘closer call’ than prior meetings,” Powell noted, emphasizing that inflation trends remain “sideways” while risks to the labor market are “diminishing.”

Aditya Bhave, senior U.S. economist at Bank of America, described the Fed’s message as “unabashedly hawkish.” He pointed to the shift in officials’ 2025 forecasts, which now anticipate just two quarter-point rate cuts instead of three, calling it a “wholesale shift.”

JPMorgan Chase, a key player in U.S. bond markets, noted that money markets are pricing in only a 0.31 percentage point rate cut in 2025. This outlook, significantly tighter than the bank’s earlier 0.75-point forecast, underscores the magnitude of the Fed’s policy shift.

The decision triggered a sharp sell-off on Wall Street, with the S&P 500 falling 3% and the tech-heavy Nasdaq Composite dropping 3.6%. High-profile winners of the 2024 rally were hit hard, including: Tesla, down 8.3%; Meta (Facebook’s parent company), down 3.6%; Amazon, down 4.6%.

Smaller companies, often seen as more sensitive to US economic fluctuations, also suffered. The Russell 2000 index declined 4.4%.

In Asia, stocks fell in early Thursday trading. Benchmarks in South Korea and Taiwan dropped 1.8% and 1.6%, respectively. Meanwhile, U.S. government bond prices fell, driving the yield on two-year Treasuries—sensitive to Fed policy—up by 0.11 percentage points to 4.35%.

The U.S. dollar surged 1.2% against a basket of six major currencies, reaching its strongest level since November 2022. According to Wells Fargo senior economist Mike Pugliese, the currency had already been rising on expectations of inflationary pressures following Donald Trump’s election victory last month. However, Wednesday’s Fed decision “poured more petrol on the fire.”

The South Korean won dropped to a 15-year low against the dollar, while the Japanese yen weakened 0.5%.

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Amazon pledges $1 billion to Trump inauguration fund

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Amazon confirmed on Thursday that it will contribute $1 million to Donald Trump’s inauguration fund, a move mirroring similar actions by other major tech companies, including Meta, the parent company of Facebook and Instagram. Amazon also plans to broadcast Trump’s inauguration via its Prime Video service.

This announcement comes as major tech executives seek to establish ties with the incoming U.S. president, despite Trump’s longstanding criticisms of Big Tech. Trump has frequently accused technology companies of censorship and bias against conservative media.

Jeff Bezos, Amazon’s founder and CEO, is reportedly planning to meet Trump at his Mar-a-Lago resort next week, according to The Wall Street Journal, which first reported Amazon’s donation. Similarly, Google CEO Sundar Pichai and Apple CEO Tim Cook have expressed their congratulations to Trump since his election victory in November.

Trump’s relationship with Amazon has been fraught with challenges. During his first term, he accused the company of undercutting competition and criticized its tax policies. In 2018, Trump ordered a review of U.S. Postal Service package pricing, claiming the agency acted as Amazon’s “courier.”

Apple, meanwhile, faces potential risks from Trump’s proposed tariff policies, which could disrupt critical supply chains in China. However, during Trump’s first term, Cook secured exemptions for certain Apple products.

Meta’s CEO, Mark Zuckerberg, and other tech leaders have also engaged with Trump. According to The Information, Zuckerberg dined with Trump after the election. Pichai is also expected to meet Trump this week.

While Trump scrutinized Big Tech during his presidency, Amazon now faces mounting regulatory pressure under President Joe Biden. The U.S. Federal Trade Commission (FTC), led by Lina Khan, has been investigating Amazon for alleged monopoly practices, with several states filing lawsuits last year. The FTC is also examining major cloud service providers, including Amazon, over partnerships in artificial intelligence.

Despite earlier conflicts, Bezos recently praised Trump for his “tremendous grace and courage under real fire” in a post on X (formerly Twitter) following an assassination attempt. Bezos, who also owns The Washington Post, reportedly prevented the newspaper from endorsing Trump’s Democratic opponent Kamala Harris in the 2024 election.

Speculation about a tacit agreement between Bezos and Trump has surfaced, allegedly tied to Blue Origin, Bezos’s rocket company competing with Elon Musk’s SpaceX.

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Investors poured $140 billion into U.S. equities following Trump’s victory

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Nearly $140 billion has flowed into U.S. equity funds since last month’s election, as investors anticipate Donald Trump’s administration will implement sweeping tax cuts and regulatory reforms.

According to the Financial Times (FT), which cites data from EPFR, U.S. equity funds have seen inflows totaling $139.5 billion since Trump’s victory on November 5. This surge in investment made November the busiest month for equity inflows since records began in 2000.

The massive influx of funds has driven major U.S. stock indexes to a series of record highs, as investors appeared to shrug off concerns about potential economic risks, including inflation and its implications for the Federal Reserve’s interest rate policy.

“The growth agenda that Trump has put on the table is being fully embraced,” said Dec Mullarkey, Chief Executive of SLC Management. He added that Trump’s picks for top administration posts have been seen as “very market friendly.”

Trump has promised to fill his administration with financial experts, including Scott Bessent as Treasury Secretary, and Paul Atkins, a cryptocurrency advocate, as Chairman of the Securities and Exchange Commission (SEC).

The president-elect has outlined a pro-growth agenda, emphasizing reduced taxes, deregulation, and economic expansion. These proposals have spurred optimism among investors, fueling a rally in the market.

The S&P 500, Wall Street’s primary stock market indicator, has risen 5.3% since Election Day, bringing its total gains for the year to 28%. Smaller companies, which are often seen as more responsive to changes in the U.S. economy, have outperformed larger firms during this period. The Russell 2000 index recently hit a record high for the first time in three years.

While U.S. equity funds have enjoyed record inflows, other global markets have experienced outflows emerging market funds have seen net withdrawals of $8 billion, with China-focused funds accounting for $4 billion; funds investing in Western Europe have lost $14 billion; and Japan-focused funds have seen outflows of approximately $6 billion.

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