Beijing has announced plans to implement new national security legislation in Hong Kong that would expand its powers to break up large gatherings – like protests – a significant move in China’s push to bring Hong Kong fully under mainland authority. U.S. Secretary of State Mike Pompeo called it a “death knell” for the partial autonomy Beijing promised to uphold for Hong Kong in the 1997 handover of the island from the U.K. to China. Previous attempts by China to pass laws tightening Beijing’s authority over Hong Kong have sparked massive protests, most recently in 2019, in response to a bill that would have allowed for extradition of Hong Kong citizens to the mainland (and elsewhere). Recent protests were virtually brought to a halt by the Covid-19 outbreak, but a fresh wave of unrest is likely in response to this latest development, and U.S. officials and congress are already calling for punitive measures in response, such as sanctions on Chinese officials for suppression of democracy. One other option that will be proposed – but will likely just be noise at this point – is U.S. removal of Hong Kong’s special status under trade and other laws, which would mean that trade restrictions that apply to mainland China, such as export controls, would also apply to Hong Kong. This issue is one of many irritants in the U.S.-China relationship, including U.S. moves to prevent tech giant Huawei from playing a significant international role in 5G networks, its support for Taiwan, and territorial disputes between China and its neighbors in the South China Sea. As with other flash points in the bilateral relationship, this incident is unlikely to erupt in direct conflict, but every new provocation-and-response heightens the risk of a miscalculation by either side.

Social unrest returns to Chile as protesters criticize the government’s handling of the coronavirus pandemic and economic fallout. A surge in COVID-19 cases led to a strict lockdown of capital city Santiago last week and protests this week. While the government of Chilean President Sebastian Piñera has sought to slow the pace of community spread, dozens of people took to the streets in the El Bosque neighborhood on May 19 to protest job losses and food shortages resulting from the shutdowns. Demonstrators clashed with police who used tear gas and water cannons to disrupt the crowds. The word “hambre” (meaning hunger) was illuminated on a building in Santiago. President Piñera has announced plans to distribute food to low and middle-class households as part of a larger stimulus package aimed at shoring up the Chilean economy which is contracting quickly amid the global slowdown. Chile also expects the International Monetary Fund (IMF) to approve a two-year loan for $23.8 billion, due in part to the sound fiscal policies of the Piñera government. However, these measures may not be enough to stave off social unrest in Chile which was only recently quelled after mass protests rocked the country in 2019. Unfortunately, postponement of a national referendum on amending the constitution, originally scheduled for April 25 but moved to October 26, is likely to lead to further frustration. Without the ability to voice their discontent through the ballot box, ordinary Chileans could return to the streets in protest, leaving open the possibility of another period of social unrest in the country.

Venezuela has filed a lawsuit against the Bank of England for the release of $1 billion worth of gold while also awaiting five fuel tankers from Iran, both signs of deepening financial strain on the Maduro regime. President Nicolás Maduro claims that Venezuela will use funds from the sale of its gold reserves to respond to the coronavirus pandemic and has proposed that the funds be transferred to the United Nations Development Programme (UNDP). In a lawsuit filed this week, Venezuela argued that the Bank of England should release the funds, despite U.S. sanctions, to address the humanitarian crisis. At the same time, Venezuela is awaiting Iranian oil tankers set to deliver 1.5 million barrels of fuel to Venezuela in the coming days. The ships passed through the Suez Canal earlier this month. Reportedly, the Venezuela military will escort the ships to port and has warned the United States from interfering with the transfer of needed goods. Venezuela’s oil production has dropped significantly due to mismanagement by the government and U.S. sanctions on the sector, and the country has been suffering from an acute gasoline shortage in recent weeks. Venezuelan opposition leader Juan Guaidó, who has been recognized as the legitimate interim leader of Venezuela by the United States, has warned the Bank of England from releasing the funds to Maduro and has pointed to the Iranian fuel transfer as further evidence of Maduro’s mismanagement and corrupt dealings. Gauidó continues to state that negotiations are the only way out of the crisis. He also rejects any part in the failed “Operation Gideon” on May 3 when a number of armed Venezuelan expats and two Americans clashed with Venezuelan security forces off the coast of Venezuela. Maduro proclaimed the assault an attempted coup, while Guaidó condemned Maduro for staging a “massacre” for propaganda purposes. These latest developments signal the deepening strain on Maduro, facing U.S. sanctions, a significant oil crisis, and the coronavirus economic fallout.

Oil prices have staged a comeback, with the U.S. benchmark trading above $30/barrel after falling into negative territory earlier this month, on the back of OPEC+ production cuts and tentative reopenings around the world. Oil demand in China, the world’s second-biggest consumer, is almost back to pre-pandemic levels, thanks in part to commuters choosing driving over public transportation, but demand for aviation fuel is still lagging. Saudi national oil giant Aramco’s share price has recovered to levels not seen since before Saudi Arabia and Russia set off an oil price war, amid the demand shock of the pandemic, that helped drive oil prices to negative levels in the U.S. This development is welcome news, especially for economic recovery prospects in oil-producing countries like the U.S. However, recent reports of new partial lockdowns in parts of South Korea, China, and other locations where the virus had been thought to be under control highlight the risk of more demand shocks to come.