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Services Surveys Signal ‘Expansion’ In June, Inflation Fears Remain High

Services Surveys Signal ‘Expansion’ In June, Inflation Fears Remain High

On the heels of strong Manufacturing survey data this week, US Services data expectations were more mixed for June (PMI exp down, ISM exp up) amid a sudden plunge in ‘hard’ data.

  • S&P Global US Services PMI fell from 53.7 to 52.9 in June (below the 53.1 expectations) – still above 50 (expansion).

  • ISM Services rose from 49.9 to 50.8 in June (above the 50.6 expectations) – back above 50 (expansion)

Baffle ’em with bullshit…

Source: Bloomberg

Under the hood, the picture was more mixed with new orders rising back into expansion territory but employment falling further and prices paid dipping modestly (from two year highs)…

Source: Bloomberg

Positive responses:

  • “After several slow months, business is starting to increase. New requests are going out to suppliers.” [Other Services]

  • “Business seems to be picking up. Many of the macroeconomic factors that were concerning look to be playing out in our favor. High interest rates are still a problem. Supplies are ample for current business levels.” [Wholesale Trade]

  • “Restaurant sales and traffic remain flat to prior year. Staffing is adequate for our current needs, and no supply chain concerns this month.” [Accommodation & Food Services]

  • “Prices have gone up from tariff recovery fees — separate line items — but the supply chain, deliveries and inventories have remained mostly stable after the initial disruption. Costs continue to increase across the board, so our goal is to mitigate that.” [Health Care & Social Assistance]

Negative responses:

  • “Confidence in a predictable economic environment has eroded to a point where capital investments are being severely curtailed.” [Professional, Scientific & Technical Services]

  • “Increased cost from tariffs and the potential for tariffs is impacting cost increases. Higher cost of high-dollar items like 150-horsepower farm tractors are forcing farmers to delay purchasing or purchase used equipment. Tension in the Middle East is creating great concern and uncertainty.” [Agriculture, Forestry, Fishing & Hunting]

  • “Sales remain stubbornly slow due to affordability issues with higher mortgage rates and high property values. Residential construction has embarked on cost-cutting measures through value engineering, supplier margin reductions and layoffs.” [Construction]

  • “General uncertainty around the economy continues to drive increases in prices. Also, lots of SaaS (software-as-a-service) vendors are using the AI (artificial intelligence) boom to restructure pricing and products, resulting in massive increases.” [Information]

  • “Business growth is slow. Global economic conditions impacted by U.S. tariffs are creating significant uncertainty, which is holding businesses back from making short- to medium-term business decisions.” [Real Estate, Rental & Leasing]

  • “General uncertainty around the economy continues to drive increases in prices. Also, lots of SaaS (software-as-a-service) vendors are using the AI (artificial intelligence) boom to restructure pricing and products, resulting in massive increases.” [Information]

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:

“The US service sector reported a welcome combination of sustained growth and increased hiring in June, but also reported elevated price pressures, all of which could add to pressure on policymakers to remain cautious with regard to any further loosening of monetary policy.

“Viewed alongside an improvement in manufacturing growth reported in June, the services PMI indicates that the economy grew at a reasonable annualized rate approaching 1.5% in the second quarter, with momentum having improved since the lull seen in April. Rising demand for services has meanwhile encouraged firms to take on additional staff at a rate not seen since January.

However, Williamson notes that “we are seeing some worrying signs of weakness below the headline numbers.”

“…notably in respect to exports and falling activity among consumer-facing service providers, which has curbed the overall pace of economic expansion. Concerns over government policies have meanwhile created uncertainty and dampened spending on services more broadly, while also ensuring confidence in the outlook remains subdued compared to the optimism seen at the start of the year.

The continued expansion of business activity in the coming months along the lines seen in June is therefore by no means assured.

“Price pressures have remained elevated in June. Although weak demand and intense competition were reported to have helped moderate the overall rate of increase compared to May, the overall rate of prices charged inflation for services remains the second-highest for over two years, thanks to widelyreported tariff-related cost increases, and will likely contribute to higher consumer price inflation in the near-term.”

So take your pick… did the Services sector improve in June (ISM) or deteriorate (PMI)?

Tyler Durden
Thu, 07/03/2025 – 10:06

NATO Chief ‘Totally Understands’ US Halting Weapons For Ukraine As Russia Celebrates

NATO Chief ‘Totally Understands’ US Halting Weapons For Ukraine As Russia Celebrates

NATO Secretary General Mark Rutte spoke to Fox News in a Wednesday interview, reacting to the ‘shock’ White House announcement halting many arms and ammo transfers to Ukraine. Rutte said that he understands the United States’ need to safeguard its own defense stockpiles, however, still made an appeal for ongoing urgent support from Washington.

“I totally understand that the US always has to make sure its interests are covered,” Rutte told Fox. “When it comes to Ukraine, in the short term, Ukraine cannot do without all the support it can get.”

Via Shutterstock

The White House had earlier described that in the context of the Russia-Ukraine war the “decision was made to put America’s interests first following” a Defense Department “review of our nation’s military support and assistance to other countries across the globe.”

Many reports over the last couple years have sounded the alarm that US military stockpiles are falling dangerously low, and that they will continue to be depleted based on past Ukraine policy and pledged future transfers.

The items being halted were key weapons systems previously promised to Ukraine’s military, ranging from Hellfire missiles to Patriot missiles to precision-guided artillery shells and munitions for F-16 fighter jets. Newsweek says that Russia is ‘celebrating’ the development:

Peskov referred to “empty warehouses” housing the American arms and said that the fewer weapons given to Ukraine “the closer the end of the special military operation,” referring to the official Kremlin term for its full-scale invasion. Peskov expressed the same sentiment to reporters on Thursday, according to state news agency Tass.

The ISW said the U.S. suspension will reinforce Putin’s plan, expressed in June 2024 and repeated since then, to win a war of attrition with slow advances as he waits for Western support for Ukraine to dry up.

Presidents Trump and Zelensky are expected to discuss the stoppage of these deliveries to Kiev in a call on Friday. Financial Times says they are expected to discuss deal-making to keep the arms flowing, though obviously Zelensky has had very rocky relations with the US leader of late:

Ukrainians were alarmed by the pause in deliveries of weapons including some now being held in Poland while Russia intensifies a summer offensive that involved its largest aerial attack of the war last weekend. Zelenskyy has said he wants to buy 10 Patriot systems for $15bn to defend against Russian drones and missiles.

Trump suggested during the Nato summit that he would consider selling Patriot interceptors to Kyiv, but said supplies were low. Defence department spokesman Sean Parnell said on Wednesday the halt in deliveries came after a “capability review” conducted “to ensure US military aid aligns with our defense priorities”.

The question of an acceptable amount of hardware in the Pentagon’s own stockpiles isn’t expected to be of much concern to Ukraine and its closest European supporters.

Pro-Ukraine hawks in Congress are also angry and looking for answers…

They are already lashing out, angry that the arms pipeline is dwindling further. Ukrainian foreign minister Andriy Sybiha has informed the US Embassy in Kiev that “any delay or hesitation in supporting Ukraine’s defense capabilities only encourages the aggressor to continue the war and acts of terror.”

Tyler Durden
Thu, 07/03/2025 – 10:00

“June Looks Strong”: Boeing Monthly Aircraft Delivery Tracker Signals Recovery

“June Looks Strong”: Boeing Monthly Aircraft Delivery Tracker Signals Recovery

Goldman analysts led by Noah Poponak maintain a “Buy” rating on Boeing, citing new Planespotters data that suggests the embattled planemaker may finally be emerging from its manufacturing slump. A series of mid-air incidents and quality control issues had previously forced 737 Max production caps, but June’s stronger delivery figures point to a potential turnaround.

Poponak told clients that Planespotters’ aircraft delivery tracker for Boeing planes is trending around 58 deliveries for June (57 excluding 1 KC-46A delivery), including 42 737 MAX and 9 787.

“Of the 42 MAX deliveries, we estimate 37 were new production, with 5 from inventory. 58 deliveries is a step function improvement over the mid-40 delivery rate BA has been holding for the last 5 months,” the analyst said. 

Poponak noted the uptick in deliveries, calling June “strong” and “another month of progress,” as well as the highest in quite some time, adding that it “indicates to us that product quality improvements are holding, enabling higher production rates, and therefore allowing for more deliveries.”

“We think BA will stabilize MAX production at ~38/month over the next several months, request a move to 42/month late in 2025, and raise production in increments of 5/month thereafter,” he said. 

Here’s a breakdown of Boeing’s June deliveries by aircraft variant.

Poponak is Buy rated on the stock with a 12-month price target of $226. He said this is derived from targeting a 3.8% free cash flow yield on 2026E free cash. 

Boeing shares are consolidating, a sign that direction could, at some point, be coming. 

Related:

Spoiler alert: Boeing is not on the ‘must-own’ defense stocks… 

Tyler Durden
Thu, 07/03/2025 – 09:20

My Wray Or The Highway: New Report Raises Troubling Questions Over The FBI Spiking Report Contradicting Director

My Wray Or The Highway: New Report Raises Troubling Questions Over The FBI Spiking Report Contradicting Director

Authored by Jonathan Turley,

Newly declassified FBI documents obtained by Fox raise troubling questions over the FBI allegedly spiking findings that contradicted the testimony of  then-FBI Director Christopher Wray.

The FBI had uncovered a Chinese conspiracy to influence the election in favor of then-President Joe Biden, including the creation of false driver’s licenses.

Wray denied that such efforts were occurring and the FBI reportedly proceeded to effectively bury the report.

Agents had found that the Chinese manufactured fake driver’s licenses and shipped them to the U.S. in a scheme to help Biden. That not only contradicted the narrative of the election, but Wray’s testimony.

Wray testified before Congress that the FBI had not seen any coordinated voter fraud ahead of the 2020 election:

“We have not seen historically any kind of coordinated national voter fraud effort in a major election, whether it is by mail or otherwise.”

However, that does not appear to be true.

The FBI “recalled” the reporting after his testimony “in order to re-interview the source.” It also directed “recipients” of the original report to “destroy all copies of the original report and remove the original report from all computer holdings.”

In a letter to Sen. Chuck Grassley (R, Iowa), Assistant FBI Director Marshall Yates stated that “Although the source was reengaged and provided additional context to support the initial IIR, FBI Headquarters maintained its position not to republish the report.”

Of course, there is little interest in most of the media on this foreign interference story despite the allegations of a cover up before the election.

Critics are alleging a cover up with FBI agents effectively told that it is my Wray or the highway when it came to Chinese interference with the election.

Tyler Durden
Thu, 07/03/2025 – 09:00

Trade Thaw: US Lifts Curbs On Ethane & Chip Design Software Exports To China

Trade Thaw: US Lifts Curbs On Ethane & Chip Design Software Exports To China

With just six days until President Trump’s ‘reciprocal’ tariff pause ends worldwide, the Trump administration is accelerating efforts to secure trade deals with key countries. On Wednesday, Trump signed a new trade agreement with Vietnam, and emerging headlines in financial corporate media only suggest negotiations with China may also be gaining traction. 

The first encouraging sign comes from a Bloomberg report stating that the Trump administration rescinded license requirements for ethane exports to China, allowing companies like Enterprise Products Partners and Energy Transfer LP to resume direct shipments without seeking additional approval.

The restrictions, introduced a few months ago, had disrupted US-China petrochemical trade, forcing tankers to reroute or idle. With the rollback, exports are expected to rebound to seasonal levels of 240,000 barrels per day in July. 

In a series of notes, we’ve outlined how American petrochemicals—particularly ethane—are critical to Chinese plastics manufacturers, and how the Trump administration’s export restrictions, used as leverage in the trade war, risked triggering supply shocks (read here) and mass factory shutdowns across China’s industrial base.

With ethane flows set to rebound, another encouraging sign materialized overnight, as reported by Bloomberg in a separate article, the Trump administration lifted export license requirements for U.S. chip design software sales to China. 

The Commerce Department notified top electronic design automation (EDA) software companies — Synopsys, Cadence, and Siemens — that licenses are no longer needed to sell to Chinese clients. Siemens has resumed full service, while Synopsys and Cadence are restarting operations.

The rollback reverses May’s crackdown, which came in response to China’s curbs on rare earth exports. Under the new trade agreement, finalized in London, the U.S. agreed to ease restrictions on EDA software, ethane, and jet engines, contingent on China accelerating export approvals for critical rare earth minerals. 

All of this suggests that the U.S. and China are making progress in trade talks ahead of the July 9 deadline, when Trump’s suspended “reciprocal” tariffs are set to take effect. Hopefully, the Chinese export channel of rare earths can finally reopen for U.S. companies plagued with shortages. 

Tyler Durden
Thu, 07/03/2025 – 07:20

Euro Stablecoin By DWS And Deutsche Bank Gets Regulatory Approval

Euro Stablecoin By DWS And Deutsche Bank Gets Regulatory Approval

Authored by Adrian Zmudzinski via CoinTelegraph.com,

AllUnity, a joint stablecoin venture by asset manager DWS and banking giant Deutsche Bank, received a license from the German Federal Financial Supervisory Authority (BaFin), according to a Wednesday announcement.

BaFin has granted an E-Money Institution (EMI) license to AllUnity. With the license, the company plans to issue a regulated and BaFin-licensed euro-pegged stablecoin, EURAU, in compliance with the Markets in Crypto-Assets Regulation (MiCA) framework.

AllUnity said EURAU will feature institutional-grade proof-of-reserves and financial reporting.

The initiative, which also involves US-based Galaxy Digital, aims to provide euro-denominated digital assets that integrate seamlessly into the workflows of regulated institutions, fintech platforms and enterprise treasuries. Amsterdam-based Flow Traders will serve as the project’s liquidity provider.

Source: AllUnity

The stablecoin battle for Europe

The announcement comes as Europe emerges as a key battleground in the global stablecoin race, following the full implementation of MiCA on Dec. 30, 2024.

The development is partially due to the fact that the worldwide stablecoin market leader Tether has so far declined to comply with the MiCA framework. This led to USDt being delisted from Binance, as well as competitors such as Kraken and Coinbase, for users in the European Economic Area.

Stablecoins race for MiCA compliance

Earlier this week, Paxos announced the launch of its MiCA-compliant Global Dollar (USDG) stablecoin in the EU.

Mid-April reports revealed that the market cap of Circle’s MiCA-compliant stablecoin Euro Coin was growing quickly.

Circle’s stablecoins likely benefited from the implementation of MiCA, with Euro Coin and USDC reaping the rewards of its regulatory-friendly approach. The company’s stablecoins are the top euro and US dollar-pegged stablecoins that comply with MiCA.

Still, CoinMarketCap data shows that USDt remains the undisputed market leader, with a market cap of under $158 billion. USDt has a significant lead over the second-largest stablecoin, USDC, with a market cap of less than $62 billion.

Tyler Durden
Thu, 07/03/2025 – 06:30

These Are The US Cities With The Most And Least Health Insurance

These Are The US Cities With The Most And Least Health Insurance

In 2023, 92% or 305 million Americans had health insurance, either for some or all of the year.

Health insurance coverage varies widely across the country, shaped by differences in state policies, economic conditions, and local job markets.

This map, via Visual Capitalist’s Kayla Zhu, shows the top and bottom U.S. metropolitan areas by share of residents with health insurance, based on data from the U.S. Census Bureau.

Data is for 2023 and shows the share of civilian noninstitutionalized population with health coverage, public or private.

Cities With the Highest Rates of Health Insurance Coverage

In this table, we show the top U.S. metro areas by share of residents with health insurance.

Amherst, Massachusetts was the most insured metro area in the U.S. in 2023, with 98.4% of its residents covered under some sort of health insurance.

The cities with the highest rates of health insurance coverage are mostly concentrated in Massachusetts—one of the top states by median income and average hourly wage—and the Midwest.

Massachusetts is also one of the most highly educated states, which has shown to have a correlation with health insurance coverage.

Cities With the Lowest Rates of Health Insurance Coverage

Below we show the bottom U.S. metro areas by share of residents with health insurance.

Laredo, a border city in Southern Texas was the metro area with the lowest share of residents with health insurance at 70.7%.

Texas dominates the bottom of the ranking, with 7 of the 10 lowest-coverage metro areas. Many border cities including Laredo, McAllen (74.7%), and Brownsville (76.5%) have some of the lowest rates of insured populations.

Texas is one of 10 states that did not expand Medicaid under the Affordable Care Act.

It also has some of the highest health care insurance costs in the country, which contributes to its relatively lower share of insured residents.

To learn health care insurance in the U.S., check out this graphic that visualizes life expectancy and health spending per capita across developed nations.

Tyler Durden
Thu, 07/03/2025 – 05:45

Schengen Shaken? Poland To Introduce Border Controls With Germany As Migration Crisis Grows

Schengen Shaken? Poland To Introduce Border Controls With Germany As Migration Crisis Grows

Via Remix News,

Poland is set to reinstate temporary controls on its borders with both Germany and Lithuania, a decision that has already drawn a reaction from German Chancellor Friedrich Merz.

Polish Prime Minister Donald Tusk announced the measure on Tuesday, stating: “We have decided that we are restoring temporary control on the border of Poland with Germany and Poland with Lithuania,” adding that the Polish Ministry of the Interior and Administration is currently preparing the necessary implementation of the law.

He said the new border controls are designed to “limit and reduce the uncontrolled flow of migrants back and forth.”

Recently, a number of videos have displayed German police dumping migrants across the border, prompting Poles to set up citizen patrols at various border points. The situation remains volatile.

In addition, Tusk’s main opposition, Poland’s Law and Justice party (PiS), continues to hit him hard over the issue.

​”Germany regularly transfers illegal migrants to our side. The state has abdicated, and chaos and impunity are growing day by day. Officers lack the tools to act. They have been left to fend for themselves. The cardboard state has failed once again. Ordinary people—citizens—are starting to organize to defend the border. And we will not leave them alone,” wrote PiS leader Jarosław Kaczyński.

He added that “Parliamentarians and activists of Law and Justice will travel to the border. We will support those who fight for the safety of our families. We demand immediate action: a ban on entry to the territory of Poland for people from the Middle East and North Africa, and the restoration of random checks at the border with Germany. Poland’s security is non-negotiable.”

Tusk revealed that he had engaged in multiple discussions with the German chancellor, conveying that “Poland’s patience in this matter is not unlimited,” particularly in light of altered practices that complicate determining the rightful return of individuals to Poland.

German Chancellor Friedrich Merz, commenting on the development on Tuesday, affirmed Germany’s “close cooperation with Poland in the field of border control.”

He further emphasized Germany’s commitment to preserving the Schengen Area, but underscored that “it is only able to function if it is not abused by criminals who smuggle migrants.”

Notably, following Merz’s election victory, Germany set up various border control checkpoints across the country’s borders. In many cases, many of these migrants are being rejected at the border by German police. Poles apparently want them to keep moving onward into German territory, which is fueling tensions.

Meanwhile, Lithuanian Foreign Minister Kestutis Budrys, speaking at a press conference in Vilnius, disclosed that he had been informed by Polish Foreign Minister Radosław Sikorski on Monday evening of Poland’s intention to introduce increased controls on the Lithuanian-Polish border.

Budrys stressed the importance of assessing “the actual numbers, dynamics, number of detained illegal migrants in the territory of Lithuania and Poland. Some data we already have.”

He concluded by stating the need to establish effective measures that “will not violate our common interest in the free movement of people, and will also contribute to our pursuit of strong and hard protection of the external border of the European Union and NATO.”

Read more here…

Tyler Durden
Thu, 07/03/2025 – 05:00

This Is Where Millionaire Populations Are Growing

This Is Where Millionaire Populations Are Growing

The number of millionaires rose fastest over the past 10 years in Montenegro, the United Arab Emirates and Malta, according to a new report by Henley & Partners. 

As Statista’s Katharina Buchholz reports, the growth by up to 124 percent was largely driven by millionaires immigrating to the locations, the researchers concluded.

Malta’s and Montenegro‘s investment for citizenship schemes are playing a role here as well as the two countries’ mild climate and natural beauty which is attracting the super-rich and has led to a boom in luxury real estate and other lux offerings.

The United Arab Emirates has long been known as a luxury destination for expats and holiday-makers and like the two former countries also features a tax regime favorable to millionaires.

Poland, China and India meanwhile feature among the top 8 of the countries with the fastest-growing millionaire population in relative terms mostly independent of immigration.

Infographic: Where Millionaire Populations Are Growing | Statista

You will find more infographics at Statista

All countries have experienced strong economic growth and modernization over the course of the past decades.

Their large workforces have attracted foreign and domestic investments as the nations are moving toward middle and high income status. China and India, however, also feature among the countries with the largest net emigration of millionaires, surpassed in 2024 only by the United Kingdom.

Tyler Durden
Thu, 07/03/2025 – 04:15

The Latest Trouble In Russian-Azerbaijani Relations Might Be Part Of A Turkish-US Powerplay

The Latest Trouble In Russian-Azerbaijani Relations Might Be Part Of A Turkish-US Powerplay

Authored by Andrew Korybko via Substack,

Turkiye sees an opportunity to turbocharge its rise as a Eurasian Great Power along Russia’s entire southern periphery in ways that autonomously align with American grand strategic interests…

Russian-Azerbaijani relations are in trouble as a result of two scandals. The first concerns the recent police raid against suspected ethnic Azeri criminals in Yekaterinburg, during which time two of them died in circumstances that are now being investigated. That prompted Baku to officially complain to Moscow, after which a vicious infowar campaign was launched on social media and even among some publicly financed outlets as well alleging that Russia is “Islamophobic”, “imperialist”, and “persecuting Azeris”.

This was shortly thereafter followed by a police raid on Sputnik’s office in Baku, which had been operating in a legal gray zone after the authorities moved to effectively shut it down in February, thus resulting in the detainment of several Russians. That earlier decision was suspected to be connected to Azerbaijan’s displeasure with Russia’s response to late December’s airline tragedy in the North Caucasus that was caused by a Ukrainian drone attack at the time. Readers can learn more about it here and here.

Before determining who’s responsible for the latest trouble in bilateral ties, it’s important to recall the larger context within which all of this is unfolding. Prior to late December’s incident, Russian-Azerbaijani relations were proceeding along a very positive trajectory in accordance with the strategic partnership pact that President Ilham Aliyev agreed to with Putin on the eve of the special operation in late February 2022. That built upon Russia’s role in mediating an end to the Second Karabakh War in November 2020.

More recently, Putin visited Baku last August, the significance of which was analyzed here and here. This was followed by Aliyev visiting Moscow in October in connection with the CIS Heads of State Summit. Shortly before late December’s airline tragedy, Aliyev then gave an extended interview to Rossiya Segodnya head Dmitry Kiselyov in Baku, where he elaborated on Azerbaijan’s multi-aligned foreign policy and newfound suspicions of the West’s regional intentions towards the South Caucasus.

On that topic, the Biden Administration sought to exploit Armenia’s loss in the Second Karabakh War to more radically turn it against Russia and thus transform the country into a joint French-US protectorate for dividing-and-ruling the region, which worsened relations with Azerbaijan. The Trump Administration appears to be reconsidering that, however, and might have even agreed to let Armenia become a joint Azeri-Turkish protectorate instead. It’s this perception that’s driving the latest unrest in Armenia.

From Russia’s perspective, the French-US protectorate scenario could spark another regional war that might spiral out of control with unpredictable consequences for Moscow if they weaponize the revival of Armenian revanchism. Similarly, the Azeri-Turkish protectorate scenario could turbocharge Turkiye’s rise as a Eurasian Great Power if it leads to an expansion of its influence (especially military) in Central Asia. The ideal scenario is therefore for Armenia to return to its traditional status as a Russian ally.

Having explained the context within which the latest trouble is unfolding, it’s now time to determine who’s responsible. Objectively speaking, the Azerbaijani authorities overreacted to the recent police raid in Yekaterinburg, which signaled to civil society that it’s acceptable (at least for now) to wage a vicious infowar campaign against Russia. Some officials with an unclear connection to Aliyev then authorized the raid on Sputnik’s office as an escalation under the implied pretext of an asymmetrical response.

Given the ambiguity about Aliyev’s role in Azerbaijan’s overreactions, it’s premature to conclude that he decided to jeopardize the strategic ties with Russia that he himself cultivated, though he must still take responsibility even if mid-level officials did this on their own. That’s because Baku’s official complaint to Moscow and its raid on Sputnik’s office are state actions, unlike the recent police raid in Yekaterinburg, which is a local action. He’ll thus likely have to talk to Putin sometime soon to resolve everything.

The abovementioned observation doesn’t explain why mid-level officials might have overreacted to the Yekaterinburg police raid, which can be attributed to the deep-seated resentment that some have against Russia and speculative foreign influence. Regarding the first, some Azerbaijanis (but importantly not all and seemingly not the majority) harbor such sentiments, while the second might be linked to the scenario of the US letting Armenia becoming a joint Azeri-Turkish protectorate.

To elaborate, the US and France would struggle to turn Armenia into their own joint protectorate due to Georgia successfully repelling several rounds of Biden-era Color Revolution unrest, which aimed to pressure the government into opening up a “second front” against Russia and toppling it if it refused.

The military logistics required for turning Armenia into a bastion from which they could then divide-and-rule the region therefore are no longer reliable since they could only realistically run through Georgia.

Accordingly, the Trump Administration might have decided to cut their predecessor’s strategic losses by “giving” Armenia to Turkiye and Azerbaijan, which would repair the troubled ties that he inherited with both. In exchange, the US might have requested that they take a harder line towards Russia if the opportunity emerges, knowing that neither will sanction it since that would harm their own economies but hoping that a future situation would develop to serve as the pretext for escalating political tensions.

Mid-level officials wouldn’t be privy to such talks, but the aforesaid speculative request could have trickled down to them from their superiors, some of whom might have implied state approval for overreacting to any forthcoming “opportunity”. This sequence of events could bestow Aliyev with the ability to “plausibly deny” his role in events as part of a de-escalation deal with Putin. The whole purpose of this charade might be to signal to Russia that a new order is forming in the broader region.

As was earlier explained, that order could be a Turkish-led one upon Ankara and Baku subordinating Armenia as their joint protectorate, after which they’d streamline military logistics across its territory to turn the “Organization of Turkic States” (OTS) into a major force along Russia’s entire southern periphery. To be clear, the OTS isn’t controlled by the West, but its Turkish leader and increasingly equal Azerbaijani partner could still autonomously advance the West’s strategic agenda vis-à-vis Russia in that scenario.

Just like the US and France have unreliable military logistics to Armenia, so too does Russia, so it could struggle to deter an Azerbaijani(-Turkish?) invasion of its nominal but wayward CSTO ally if Baku (and Ankara?) exploits its latest unrest (such as if Prime Minister Nikol Pashinyan falls). Moreover, the most optimal branch of the North-South Transport Corridor (NSTC) runs through Azerbaijan, which could block it if Russia takes decisive action in defense of Armenia (however limited due to the special operation).

To be clear, Russia has no intention to fight Azerbaijan, but Azerbaijan’s overreaction to the recent police raid in Yekaterinburg might be a ploy to preemptively craft the perception that Russia “backed down” as a result if Moscow doesn’t take decisive action to deter Baku if regional tensions over Armenia worsen. Had it not been for that raid, then perhaps some other pretext would have been exploited or concocted, but the point is that Russia and Azerbaijan have polar opposite visions of Armenia’s geopolitical future.

That same future is pivotal for the future of the broader region as was written, but Russia has limited means for shaping the course of events due to its complex strategic interdependence with Azerbaijan vis-à-vis the NSTC and its understandable military prioritization of the special operation. The preceding constraints are self-evident, and Aliyev (and Erdogan?) might be preparing to take advantage of them, emboldened as he(/they?) might be by Russia’s perceived setback in Syria after Assad’s downfall.

Azerbaijan is aware of its irreplaceable role in turbocharging allied Turkiye’s rise as Eurasian Great Power, which is dependent on subordinating Armenia in order to then streamline the OTS’ military logistics between Asia Minor and Central Asia via the South Caucasus. If Aliyev came to believe that his country has a brighter future as part of a Turkish-led regional order instead of a Russian-led one, especially if the US signaled approval of this as speculated, then Baku’s overreaction to recent events makes more sense.

The Moscow-mediated Armenian-Azerbaijani ceasefire of November 2020 calls for the creation of a Russian-controlled corridor across Armenia’s southern Syunik Province, which Baku calls the “Zangezur Corridor”, for connecting both parts of Azerbaijan. Pashinyan hitherto refused to implement this due to pressure from the West and the Armenian diaspora therein, but if Trump decided to “give” Armenia to Azerbaijan and Turkiye instead, then he might do it but only after squeezing Russia out of this route.

Russian control would prevent Turkiye from streamlining its military logistics to Central Asia through this corridor for the purpose of replacing Russia’s influence there with its own as part of a grand strategic powerplay that autonomously aligns with the Western agenda in the pivotal Eurasian Heartland. Azerbaijan (and Turkiye?) might therefore invade Syunik if their envisaged client Pashinyan either flip-flops on squeezing Russia out or before Russia is invited into there by a new government if he falls.

The consequences of Turkiye obtaining unhindered military access to Central Asia through either sequence of events could be disastrous for Russia since its influence there is already being challenged by Turkiye, the EU, and even the UK, which just signed a two-year military agreement with Kazakhstan. That country, with whom Russia shares the longest land border in the world, has been pivoting towards the West as was assessed here in summer 2023 and this troubling trend could easily accelerate in that event.

Reflecting on all this insight, the latest trouble in Russian-Azerbaijani relations might therefore be part of a Turkish-US powerplay, one which Trump could have agreed to with Erdogan and Aliyev later jumped on board but might still have his doubts. That would account for his “plausibly deniable” role in Azerbaijan’s overreaction to recent events. If taken to its conclusion, this powerplay could risk Azerbaijan becoming Turkiye’s junior partner with time, which he’s thus far sought to avoid through his multi-alignment policy.

If that’s the case, then it might not be too late for Putin to avert this scenario so long as he can convince Aliyev that Azerbaijan has a brighter future as part of a different regional order, one that would center on Azerbaijan continuing its Russo-Turkish balancing act instead of turbocharging Turkiye’s rise. The NSTC could figure prominently in this paradigm, but the problem is that Azerbaijan’s ties with Iran and India are very strained right now, so he’d have to prospectively mediate a rapprochement for this to happen.

Anyhow, the point is that it’s premature to assume that the latest trouble in Russian-Azerbaijani relations is the new normal or that it might even precede a seemingly inevitable crisis, though both possibilities are nonetheless credible and should be taken seriously by the Kremlin just in case. The best-case scenario is that Aliyev and Putin soon hold a call to amicably resolve the issues that have abruptly toxified their ties otherwise the worst might be yet to come and it could be disadvantageous for both.

Tyler Durden
Thu, 07/03/2025 – 03:30