Stories we’re following this week:

Qatar throws Turkey a lifeline

Amid capital flight and a collapse in investor confidence in the Turkish economy, Qatar has stepped in and pledged $15 billion in new investments in the country, giving the lira a much-needed respite. According to Reuters, the money will be channeled into Turkish banks and financial markets, and it will go toward economic projects, investments, and deposits.

The move is the confidence-booster the Turkish economy needed to temporarily stem the decline of the lira. And that’s exactly what it helped to achieve: the currency is now up from its historical lows from Monday. The ambiguity of the Qatari statement was also likely by design, as it implies that a large portion of the funding may ultimately be injected into an increasingly illiquid Turkish financial system.  However, the risk of a resumption of free-fall remains. The Qatar investment isn’t enough to gloss over the Turkish economy’s structural problems, and we can expect President Erdogan to continue to take a hard line against the United States and the West in general. In a sense, Washington’s sanctions were a gift to Erdogan in that they have allowed him to bestow ownership of the current crisis to a vindictive United States, thus exonerating the president’s own debt-fueled growth policies ahead of June elections. But given Turkey’s massive need for external financing – estimated by the Financial Times to be hovering around $238 billion in the next year alone – all paths are still leading to an IMF bailout. It’s now a question of when, not if.

From a regional perspective, the Qatar bailout further cements the two countries’ bilateral ties, and could resonate negatively in Turkey’s relations with Qatar’s current nemesis: Saudi Arabia. Turkey and Qatar have been cooperating closely both before and after the Qatar crisis. Qatar is Turkey’s second-largest investor, and Turkey operates several military bases in the Gulf state.

Ghazni city liberated, but the national security situation continues to deteriorate in Afghanistan

Afghan security forces appear to be in full control of Ghazni as of Wednesday after a week-long assault by the Taliban. Casualty reports are unconfirmed but err on the high side. Some estimates put the civilian death count at 100-150, with as many as 70 local police killed.

Ghazni is not some outlying city like Lashkar Gah or Mazar-e Sharif. It lies on the key highway corridor linking Kabul with Kandahar, and is home to over 150,000 people. Large swathes of Ghazni province have fallen under Taliban control, with many of these territorial gains coming in 2018 (according to the Long War Journal, Nawur district fell in early August 2018. Other Ghazni districts like Ajristan, Jaghatu, and Rashidan have no central government presence and are effectively under Taliban control. The end result has been a widening wedge of Taliban territory between Kabul and Kandahar, with the tip of the wedge reaching Ghazni city last week (itself only 150 km from Kabul).

Add these demoralizing losses to the quickening tempo of attacks across the country, with examples from this week alone including the bloody siege of the national intelligence service center and a suicide bombing of an exam center in Kabul’s Shia district, and a picture emerges of a besieged, bankrupt, and increasingly exhausted national government. Direct talks between the U.S. and Taliban in Qatar are adding to the despair in Kabul, with speculation rife that a deal is in the making that will legitimize the Taliban in order to halt the spread of Islamic State in the country.

Looking ahead, the fate of the civilian government of Afghanistan is as perilous as it has ever been in the post-2001 era.

New trade talks planned between China and the United States

The Dow Jones Industrial Average surged over 380 points on Thursday following news of another round of trade talks between Washington and Beijing. According to White House economic advisor Larry Kudlow, talks will resume later this month when a Chinese delegation arrives in Washington.

The two economic powers have been locked in a tit-for-tat trade war since President Trump first slapped tariffs on China in March 2018. The move has since been reciprocated by the Chinese side, which has imposed its own tit-for-tat duties on US goods twice.

News of a new round of talks is a positive sign for those who want to see an end to the trade dispute; after all, talking is better than not talking. However, there’s not too much to suggest that these talks will be any more successful than the previous round that collapsed in June. This is not so much because the Chinese side is unwilling to relent, but rather that the US side’s demands tend to be inconsistent, confusing, and/or patently unobtainable.

High-level Chinese politics are famously opaque, but there have been consistent rumblings that some segments of the CCP leadership believe that President Xi has overplayed his hand with the Americans. Though it’s impossible to verify these rumors or know the extent of any challenge to Xi’s line, this would represent an unprecedented development in the Xi era, and it may well encourage the Chinese president to offer up some new concessions in order to deescalate the trade war. On the other side, President Trump will be hoping to come away with a win ahead of looming midterm elections. Trump is no doubt troubled by recent polling data that shows his support slipping among farmers, a key part of his support base which has ended up in the crosshairs of China’s retaliatory tariffs. US agriculture export prices have been dropping broadly of late as farmers are forced to price their products more competitively amid the trade war with China.