1. There was just one part of @danwwang's excellent new book which irked me.

He repeats the claim, often made, that China has "done a terrible job of creating cultural output that the rest of the world finds appealing."

But here cultural output is defined very narrowly. 2. Dan focuses on "music, art, movies, or literature." Sure, on that front, China hasn't had big breakthroughs.

But is that all culture?

Dan sees China as an "engineering state." We need to look at the two sister disciplines of engineering: industrial design and architecture.

1. A few thoughts on snapback and Iran's apparent lack of action to avoid the return of EU/UK sanctions...

Reports suggest that @araghchi did not bring forward any proposals to avoid the E3/EU triggering snapback.

I think this is deliberate and not just negligence. 2. As Iran sees it, Europe is set to reimpose sanctions when:

The nuclear program has been significantly damaged by US airstrikes.

More sanctions will only add marginal economic pressure on Iran.

No commensurate action has been taken to address violations of norms by Israel.

1. Iran cannot match Israeli firepower in the short term, but on a longer horizon, it can likely ramp-up production of ballistic missiles and drones.

Reports suggest that Iran is producing around 50 ballistic missiles per month. To me that seems like a floor, not a ceiling. 2. There's a view that Iran is a highly militarized country. In reality, a relatively small proportion of Iran's industrial base is dedicated to defense production. Mobilization of resources will be challenging for Iran, but Israel is fighting a country with latent capacity.

1. Why hasn't China made bigger strides to develop an alternative to the US-led global financial system?

We've been talking about "de-dollarization" for years and the RMB still accounts for a tiny fraction of global trade...

What if China isn't *really* trying to de-dollarize? 2. The general theory of de-dollarization is that the increased use of economic weapons such as tariffs and sanctions by consecutive American administrations is spurring China to take the lead on the creation of an alternative financial system (which Russia, Iran etc. also want).

1. @Brad_Setser's new NYT op-ed argues that China presents a "danger the world economy" because of its enormous trade surplus in manufactured goods.

I think he is identifying an important issue about imbalances.

But his argument and this chart ⬇may exaggerate the problem. 2. At first glance, the chart substantiates the claim that China is exporting a disproportionate volume of manufactured goods to the world, even compared to other big industrial exporters like Germany and Japan.

But the chart presents surpluses as a share of *global* GDP.

1. So Netanyahu came to Washington and what he got is a memo on Iran, not an EO with new sanctions designations.

Trump said he is "unhappy" to sign to memo, and that he hopes it "will hardly have to be used," while also stating he wants a deal with Iran.

Huge shift from 2018. 2. If Trump was really aiming to resume maximum pressure, he would have signed a new EO to widen sanctions on Iran's oil sector, and Treasury would have designated Chinese ports and refiners pursuant to the EO in order to reduce volumes of Iranian crude flowing to China.

1. If there’s any geopolitical logic in the Trump tariffs, this is it:

To sustain the fleeting unipolar order and keep “America first,” the US doesn’t need to confront adversaries. It needs to coerce allies.

Trump is testing how economic coercion can make *allies* obey. 2. US political and business elites increasingly believe that the rules-based order and globalization has served to reduce the hard power gap between the US and its rivals, especially China. This threatens unipolarity.

Biden’s braintrust helped usher in this new consensus!

1. Iran is in the midst of a slow-moving energy crisis.

Sanctions are partly to blame. They have prevented investment and access to technology.

But regulation is a bigger challenge. More than 60% energy generation in Iran is undertaken by quasi-private companies. 2. This is a legacy of Iran's long and tortured push for market liberalization, which gained momentum in the early 2000s only to a hit wall when sanctions began to isolate the economy.

Officials knew that liberalization could lead to greater competitiveness and efficiency.

1. The new sanctions targeting key Russian banks have caused a sharp devaluation of the ruble. Russia's central bank isn't going to be able to keep devaluation and inflation in check as FX revenues are interrupted.

Does this mean sanctions are finally working?

Probably not... 2. To know if sanctions are working, we need to be precise about the goals.

The primary goal of sanctions is to create enough economic pain to convince Putin to change his behavior and cease the war in Ukraine. This is the coercive aim.

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/…