1. Sanctions are meant to crush industrial output. But sometimes the opposite occurs.

In Iran, the white goods industry has a problem: sanctions-induced overcapacity.

For @phenomenalworld, @BarzinJafartash and I explore how sanctions and industrial policy can collide. 2. As an oil exporter, Iran has long struggled to develop its manufacturing base.

In the early 2000s, it suffered from a classic case of "Dutch disease." An oil boom led to appreciating currency, more purchasing power, and rising imports at the expense of domestic producers.

1. Coming events may prove me wrong, but I continue to believe that Iran seeks to avoid a war with Israel.

Israel may now have the pretext to take the fight to Iran, but if Iran considered a war inevitable, tonight's attack would have looked very different. 2. Tonight's attack was not what the opening salvo of a war looks like.

It was less telegraphed than the April attack than I expected and used more advanced missiles, but the strike came only from Iran and was limited in scope, a point Iranian officials are now emphasizing.

1. The Biden admin wants to "responsibly manage" the rivalry with China. But it's relying upon coercive policies like sanctions and export controls that are inherently unmanageable. US officials are also framing policies in ways that drive escalation.

We're on a worrying path. 2. Typically, the US has used coercive tools like sanctions and export controls to deny economic opportunities and impose economic pain on target countries in response to some "malign behavior"—nuclear proliferation, terrorist financing, human rights abuses etc.

1. The Haniyeh assassination is unlikely to drag Iran into a wider war. Iranians leaders understand that Israel is achieving tactical wins in the midst of a strategic defeat.

Israel is making rash and escalatory moves because it is increasingly isolated, divided, and weak. 2. The spate of Israeli attacks and assassinations may be humiliating, but Iran has repeatedly calibrated its responses to these provocations, avoiding a wider war.

In the weeks after October 7, this was because of Iran's own reluctance to bear the costs of a larger conflict.

1. I learned today that the mountains of South Tyrol are dotted with "Venetian sawmills," which were set up in the 16th century to fuel the insatiable lumber demand of Venice, more than 150km away.

Learning about the sawmills totally changed the way I see Venice. 2. No city has depended on wood more than Venice.

Karl Appuhn wrote a book explaining how Venice's extensive use of lumber to build foundations, wharfs, warehouses, and boats, forced the rulers of "La Serenissima" to get serious about forest management.

1. Once again, a state funeral in Iran has led to a debate about how much political support the Islamic Republic enjoys.

Here's the thing...

Participation in collective mourning is a deeply embedded cultural custom in Iran.

It's not an *inherently* political act. 2. The motivation to participate in a funeral, whether for Soleimani or Raisi, is far less about the individual that has died and far more about the shared social custom.

Authorities take advantage of this cultural impulse and imbue state funerals with political iconography.

1. Sanctions have had a very significant negative effect on aviation safety in Iran.

But the idea that they contributed to the recent crash and the deaths of Raisi and Abdollahian makes little sense.

Recent reports by FT, NYT, and others taking that line miss some key details. 2. Old aircraft are not *necessarily* unsafe. The helicopter carrying Raisi was built in 1994.

Until a few years ago, the fleet of Marine Helicopter Squadron One, which transports the US president, included old Sikorsky VH-3Ds, including one from late 1970s.

1. Russia and Iran have adopted "war economies" in response to sanctions. But the aims differ.

In Iran, the aim is to boost the military by allowing it to expand its economic activities.

In Russia, the aim is to boost the economy by smartly leveraging military spending. 2. Iran has faced tougher sanctions and a more acute security dilemma.

In turn, Iranian leaders were eager to give the military (namely the IRGC) a larger piece of a shrinking pie, sustaining military spending and enabling rentierism while otherwise embracing fiscal austerity.

1. Went back to @mjavadshamsi's excellent firm-level research on how Iranian manufacturers adjusted to sanctions. This chart is really key.

What really matters for economic resilience under sanctions is not import substitution, but continued access to *export* opportunities. 2. Boosting exports is how firms in sanctioned economies try to respond to flat domestic demand, currency volatility, and rising input costs.

But this strategy may not be viable in a world where China is trying to get out of its economic slump by boosting exports.

1. Today, President Biden issued an executive order authorizing sanctions to block foreign banks that facilitate transactions related to Russian "technology, defense... construction, aerospace, or manufacturing."

Will these new secondary sanctions hobble Putin's war economy? 2. Coinciding with the new executive order, @wallyadeyemo has an op-ed in the @FinancialTimes explaining what Treasury aims to achieve.

Banks that are found to be supporting Russia's "war machine" will "risk losing access to the US financial system."
ft.com/content/f1fe5e…

1. I recently learned that although the world's largest producer of cashews is Côte d’Ivoire, the world's largest exporter of cashews is Vietnam.

Vietnam is making a fortune. Côte d’Ivoire is not.

This is a story of successful globalization and failed industrialization. 2. Last year, Vietnam exported $791m of cashews to the EU and $885m to the US.

Meanwhile, Côte d’Ivoire exported just $85m to the EU and $41m to the US.

But Côte d’Ivoire is the much bigger producer, with a crop yield of ~800k tonnes, compared to Vietnam's ~400k tonnes.

1. This is an astonishing and terrifying report by @yuval_abraham on Israel’s use of an AI system called Hasbora to conduct mass targeting in Gaza, leading to “intentional” civilians deaths.

But who makes the Hasbora system?

That’s a key question.
972mag.com/mass-assassina… 2. Back in July @marissalnew detailed how the IDF had begun using an “AI recommendation system that can crunch huge amounts of data to select targets for air strikes.”

The system she wrote about is called “Fire Factory” and is produced by Rafael.
bloomberg.com/news/articles/…

1. Does anyone have a good explanation as to why the Afghani has strengthened 20% against the dollar in the last 6 months? How is the Taliban achieving this? 2. This report by @karllesteryap and @EltafN from September points to tighter regulation of the FX market by the Taliban, but there is little detail on potential role of trade.
bloomberg.com/news/articles/…

1. It is bizarre for Iran International to attack think tank analysts over a purported "lack of transparency."

Iran International is itself untransperant.

In five years, the network has burned through $569 million. They won't tell anyone who's footing the bill. 2. This is an excerpt from Brett Stephen's op-ed on the Iran "influence network" controversy. It could be about Iran International.

Setting aside the question of editorial independence, readers and viewers of the network's content deserve to know who owns and funds the channel.

1. Today I had to read *two* articles attacking the integrity of 5 individuals whom I consider colleagues and friends. They were attacked because, as part of their work for Western think tanks, they maintained dialogue and exchanged views with Iranian officials.

It's ridiculous. 2. Here's the thing that bothers me most. There is no purpose to this "journalism" other than to try to tarnish the reputations of five highly-regarded policy experts.

There is no public service here.

It is a hatchet job from two publications that should *really* know better.

1. This bland car is the MG5.

It's an electric vehicle and it's probably the most important car in the world right now.

The story of the MG5 shows how Chinese automakers are playing the long game and winning. 2. If you've recently taken an Uber in London, you've probably been in an MG5. They're everywhere.

They also came out of nowhere.

MG sales surged as the pandemic eased. In 2021, the company became "the UK’s fastest-growing mainstream car brand," selling over 30,000 units.

1. Reports indicate that the US and Iran are nearing an informal agreement to reduce tensions and get Americans held in Tehran released. The old back channel in Oman is being used.

It might seem like we are back in 2013, but the dynamics are really novel.
wsj.com/articles/u-s-l… 2. As @laurnorman + @DavidSCloud report, US officials have been relying on Oman to facilitate negotiations, which are still indirect.

Oman played a similar role in 2013, hosting US and Iranian officials for direct talks that set the groundwork for the JCPOA.

1. In hindsight, the Polestar 1 was the harbinger of China taking over the global automotive market.

Launched in 2019, the car didn’t get that much attention. It’s significance as a technical project was overlooked.

Just 1,500 cars were made. But there was a bigger plan… 2. Originally a performance brand affiliated with Volvo, Polestar is effectively a Chinese automaker.

Volvo was acquired by Chinese automaker Geely in 2010. Five years later, Polestar was spun out into its own brand to spearhead a push into EVs.

1. Five years ago, President Trump unilaterally withdrew from the Iran nuclear deal.

But he didn't just withdraw from an agreement that was working. He resumed an economic war on Iran.

Households across Iran's social classes have suffered, leaving people disempowered. 2. This chart is from a forthcoming report by @zepkalb looking at the effect of sanctions across Iran's social classes. The findings are striking. A sanctions program that was ostensibly about putting pressure on elites dramatically reduced consumption across all social classes.

1. I just spent the last four days in Beijing, seemingly among the first set of foreign tourists to visit in three years.

It was my first time in Beijing since a summer program in high school in 2009.

I thought I’d share some very reflections on what I saw, especially the cars. 2. I’ll start with a story.

At some point around the turn of the 20th century, Empress Dowager Cixi was gifted a German Benz Velo motorcar. It’s on display today in the Summer Palace, barely visible in Cixi’s dark throne room.

1. Lula wants to end the dollar's dominance in global trade. But Brazil may be somewhat insulated from any ensuring trade competition because it exports non-sanctionable goods.

Vegetable products (HS Section 2) made up more than one-third of Chinese imports from Brazil in 2022. 2. The strategic importance of food exports enables Lula to push China to be more aggressive in moving away from the dollar.

However, if the US responds with trade restrictions or sanctions, those measures will likely spare a big portion of Brazil's trade. So Brazil is hedged.