Remaking the Middle East

Middle East diplomacy is remaking the region [View in browser]( [Bloomberg]( Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up [here](. There have been no grand summits or Rose Garden handshakes. But a series of incremental diplomatic developments are quietly remaking the Middle East. After a seven-year rift that helped stoke one of the region’s ugliest conflicts, Iran and Saudi Arabia exchanged ambassadors this week. The United Nations nuclear watchdog confirmed Tehran has slowed its enrichment of near weapons-grade uranium. And US officials have been shuttling back and forth for back-channel talks that increasingly look like a nuclear deal by stealth — all while working to broker Saudi normalization with Israel. For Saudi Crown Prince Mohammed bin Salman, the logic is clear. The eight-year conflict with Iranian-backed rebels in neighboring Yemen was threatening oil facilities and distracting from his big plans to transform the economy. For Iran, the prize is sanctions relief, even if unofficial. And for US President Joe Biden, getting more oil onto global markets is welcome, even if it’s from the Islamic Republic, and keeping gasoline prices in check. Calming tensions in the Persian Gulf, the protagonists appear to have concluded, is better after all. Fashioning a US-Israel-Saudi agreement could prove trickier. After initial reticence, Biden decided the only way to keep Saudi Arabia in the US corner and limit Chinese influence is to offer it more security. He wants to present that expanded commitment as part of a grand bargain that would simultaneously see the linchpin Islamic power make peace with Israel, preferably before next year’s US election. But good ties with China have paid off for Saudi Arabia. Beijing helped mediate the rapprochement with Iran, whereas a new Israel-US pact might resurrect old tensions. And Biden is unlikely to offer the NATO-style assurances Riyadh wants. For the Saudis, the Palestinians, and even some in Israel’s far-right coalition, a grand bargain looks somewhat less appealing. But for once, almost everyone’s talking. — [Lin Noueihed]( Saudi Foreign Minister Faisal bin Farhan Al Saud and his Iranian counterpart, Hossein Amirabdollahian, in Tehran on June 17. Photographer: Atta Kenare/AFP/Getty Images Global Must Reads Weak governance and disclosure practices in China are putting off international money managers as dozens of debt-saddled property companies, including industry giant Country Garden, struggle to stave off default. That could lead to diminished access to financing and higher borrowing costs, [further hamstringing]( China’s already sputtering economy. The US and European Union are pursuing a deal that [would impose new tariffs]( targeted at excess steel production from China, sources say. The details are still being discussed in the talks aimed at settling a dispute that started when former US President Donald Trump slapped levies on metals imports from Europe. Mexico City Mayor Claudia Sheinbaum was chosen by the country’s ruling Morena party as its presidential candidate to succeed Andres Manuel Lopez Obrador and retain power in next year’s general elections. A close ally of the president, Sheinbaum came out on top of a nationwide poll of over 12,000 voters and is the [early frontrunner]( before the vote in June. Rich nations should [soften demands]( on global warming action and help developing nations with financing and technology transfers, Indian Prime Minister Narendra Modi said in an opinion piece in the New York Times. The Group of 20 summit, which Modi is hosting, will aim for a deal to triple renewable energy capacity by 2030 while offering support to technology that can sustain the use of fossil fuels. Indonesian President Joko Widodo urged leaders at the Association of Southeast Asian Nations summit to strengthen cooperation and dialogue and not to [stoke divisions]( and “new wars.” His comments came a day after Chinese premier Li Qiang urged the bloc to oppose moves that could lead to a “new Cold War.” Millions in assets seized from Russian oligarchs will help fund an additional $1 billion in [security and humanitarian funds]( US Secretary of State Antony Blinken pledged for Ukraine during a visit to Kyiv. China plans to send its [second high-profile delegation]( to North Korea in less than two months, just before an expected trip by its leader, Kim Jong Un, to Russia that could touch on arms deals. Gabon’s military government freed Ali Bongo from [house arrest](, a week after overthrowing him in a bloodless coup, and said the former president is free to seek medical treatment abroad. Italian Prime Minister Giorgia Meloni’s government is confronting [drastically worsening budget figures](, adding pressure to her options on how to bolster finances. Washington Dispatch The announcement that a US prosecutor [intends to indict Hunter Biden]( by the end of September guarantees that the legal troubles surrounding the president’s son will remain an issue well into the 2024 election season. Special Counsel David Weiss, who has been investigating the younger Biden since 2018, made the decision weeks after negotiations over an agreement in which he would plead guilty to misdemeanor tax charges broke down. Legal proceedings against Hunter Biden could unfold at the same time as Trump, Biden’s predecessor and the frontrunner for the 2024 Republican presidential nomination, might face trials on federal and state indictments in four separate cases. One thing to watch today: Initial jobless claims for the week ending Sept. 2 will be reported by the US Department of Labor at 8:30 am ET. [Sign up for the Washington Edition newsletter]( for more from the US capital and watch Balance of Power at 5pm ET weekdays on Bloomberg Television. Chart of the Day China plans to expand a [ban on the use of iPhones]( in sensitive departments to government-backed agencies and state companies, a sign of growing challenges for Apple in its biggest foreign market and global production base. Several agencies have begun instructing staff not to bring their iPhones to work, sources say.​ And Finally Floods left a trail of devastation across Greece and Turkey, while Paris and London are baking under an autumnal heat wave. Fossil fuel emissions are warming the planet, [triggering extreme weather]( from heat waves and wildfires to violent storms and flooding. This summer was the warmest on record globally. People look at the damage caused by floods yesterday in Larissa, Greece. Photographer: Konstantinos Tsakalidis/Bloomberg More from Bloomberg - Listen to our [X Space discussion]( on the key issues at the G-20 summit in New Delhi - [Bloomberg Opinion]( for a roundup of our most vital opinions on business, politics, economics, tech and more - [Economics Daily]( for what the changing landscape means for policymakers, investors and you - [Green Daily]( for the latest in climate news, zero-emission tech and green finance Explore more newsletters at [Bloomberg.com](. 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