US and Europe Strategic Security Cooperation: The View from Washington 27 March 2023 — 9:00AM TO 10:00AM Anonymous (not verified) 9 March 2023 Chatham House

As the US prepares to enter the next presidential election cycle, can the transatlantic alliance stay the course, especially against a deepening Russia-China partnership?

Thank you for your interest in joining our event. Please plan to arrive at Chatham House from 08:45 GMT as the event will begin promptly at 09:00.

The Biden administration’s response to Russia’s war in Ukraine and the rise of a globally assertive China, as articulated in the 2022 US national strategy, is to ‘constrain Russia and out-compete China’. It needs Europe as a partner and ally for both – yet Europe is also an object and a battleground in this era of strategic competition.

As the US prepares to enter the next presidential election cycle, can the transatlantic alliance stay the course, especially against a deepening Russia-China partnership? Can Europeans, in particular, move from deepening dependency to greater agency and self-reliance? What is the role for Germany – and for the UK?

SVB collapse shows interest rate financial stability threat Expert comment LJefferson 15 March 2023

Governments must resist pressure to relax post-financial crisis regulation, while central banks should moderate their attack on inflation if financial stability is at risk.

The collapse of California’s Silicon Valley Bank (SVB) on 10 March has triggered a wave of volatility in global bank equity prices, raised questions about whether US bank regulation and its tech industry funding model are fit for purpose, and forced a rethink on the extent and pace of monetary policy tightening appropriate for the US and other advanced economies.

SVB was the US’s 16th largest bank with total assets of $212bn at the end of 2022 and a presence in eight countries around the world, including the UK. Since it was founded 40 years ago, it has maintained a strong focus on the technology sector, claiming recently that nearly half of all US venture-backed technology and life science companies banked with it. Partly as a consequence, some 95 per cent of its deposits came from corporates and hedge funds, far higher than the one-third typical of similarly sized banks.

What led to SVB’s collapse?

Ironically, SVB’s failure did not result from its core business model of serving a relatively high-risk and fast-growing sector, but rather from a dramatic failure in liquidity management. During the pandemic, SVB saw a very large inflow of corporate deposits. But rather than disincentivizing depositors or investing the funds attracted in assets of matching maturity, it chose to invest them in low credit risk, but long maturity bonds attracted by a small pick-up in return over shorter-term assets. 

When US interest rates began to rise rapidly in 2022 following Russia’s invasion of Ukraine, the value of SVB’s long-term bond portfolio declined sharply. It was left facing a large capital loss of some $15bn, roughly equivalent to its total shareholder funds. The management attempted to repair SVB’s balance sheet last week by crystalizing some of the loss and raising new capital.

But when this failed, the US supervisory authorities had no choice but to step in and close the institution.  This action was quickly followed by emergency action from other regulators vis-a-vis SVB subsidiaries and offices around the world.

The US entity has formally been taken over by the FDIC and a bridge bank established. All depositors have had their funds guaranteed, going beyond the normal federal deposit insurance limit of $250,000 per customer. However, bond holders and equity holders have been wiped out. The authorities have said that any loss will be covered by the industry as a whole via the FDIC.

In the UK, the Bank of England was able to sell the ring-fenced UK subsidiary of SVB to HSBC for £1 over the weekend, so that all its depositors and other liability holders have effectively had their funds guaranteed. In contrast to previous Bank of England rescues (such as Johnson Matthey Bank in 1984, the ‘small banks’ crisis in 1991 and the global financial crisis in 2008-9) no public money has been put at risk.

Four key questions

SVB’s rapid collapse raises four central questions:

First, how was it that the bank was able to take on such a risky interest rate maturity mismatch in its US operations? Maturity transformation is standard banking industry practice, but it is usually closely monitored by regulators who place limits on the extent of interest rate maturity mismatch and require liquidity buffers to offset the risk of deposit flight and forced asset sales.

SVB’s very high concentration of corporate deposits as compared to ‘sticky’ retail deposits, means that the risk of deposit flight was unusually high and so the bank should have been more, not less, cautious in its liquidity policy. SVB was classed as a regional bank in the US which means that it did not have to meet international regulatory standards under Basle III. And in 2018, the Trump administration approved legislation removing the post-financial crisis requirement that banks with assets under $250bn submit to stress testing and relaxing liquidity buffer requirements.

But it is still hard to understand why regulators allowed SVB to commit such a classic banking error. On Monday, the Federal Reserve ordered an inquiry into what it has correctly described as a regulatory failure. This should look at the role played by all the elements of the oversight system including the auditors, KPMG.

Second, does SVB’s failure reflect a much bigger underlying risk in the US banking sector, and potentially other banking systems around the world, built up over the prolonged period of ultra-low interest rates? SVB’s collapse was followed by the failure of the $110bn Signature Bank in New York, as well as sharp falls in US regional bank stock prices – by close of play on 14 March, the S&P Regional Bank Index was down 22 per cent on a week before, with some individual bank stocks seeing much sharper falls.  

To the extent that banks have been covered by international bank regulatory requirements, the risk of a much broader problem should be limited because stress testing and other regulatory tests would have looked at precisely the scenario that has happened. Even where large market losses have been incurred, capital buffers should be sufficient to cover them. But as SVB has shown, there are some large banks that are seemingly not required to follow international rules, while the latest developments at Credit Suisse indicate that market concerns may still arise when other factors are in play.

Third, how far, in the light of the potential vulnerability in banking systems, should central banks in advanced countries moderate their efforts to squeeze out inflationary pressures? While inflation already appears to have peaked in many economies and the pace of interest rate rises was expected to slow, inflation is far from vanquished, as recent data in the US has demonstrated.

Fourth, does the failure of SVB tell us something new about the financial risks facing the high technology sector?  It was remarkable that a single (and not particularly large, by international standards) financial institution could have played such a central role in the tech sector in both the US and UK. 

Why was this the case and does it reflect special features of the tech/start-up sector (e.g. the need for substantial cash deposits to cover relatively large negative cash flows in the early years of operation, or the need for highly specialized lending expertise). If so, should governments take steps to mitigate such risks, given the outsized importance of this sector in many national economic strategies? 

Ethics of dealing with authoritarians 28 March 2023 — 12:00PM TO 1:00PM Anonymous (not verified) 20 March 2023 Chatham House

How can democracies simultaneously defend human rights and promote open societies while still engaging with leaders from non-democratic states as strategic allies?

In 2022, the Biden administration called upon the world’s democracies to unite against a rising tide of autocracy. Through its messaging, conferences, and op-eds, the US and its allies presented the public with a binary choice: democracy or autocracy.

But in today’s world, and in the practice of international relations, the choice is rarely this simple.  

Joel Rosenthal, president of Carnegie Council, joins Chatham House to discuss how democracies and multilateral institutions can leverage ethics as a tool to assess concerns and trade-offs when engaging with illiberal actors.

Can democracies afford to be adversarial with certain countries or overly selective in cooperation when facing global-scale challenges such as climate change and the emergence of AI?

How can democracies simultaneously defend human rights and promote open societies while still engaging with leaders from non-democratic states as strategic allies?

World in brief: Ukraine and nuclear proliferation to dominate G7 The World Today mhiggins.drupal 28 March 2023

Following Russia’s ongoing intimidation, Japan will use its presidency of the G7 – and its history – to prioritize the dangers of nuclear threats, writes James Orr.

Two issues are expected to dominate the agenda as Japan hosts the G7 summit in Hiroshima from May 19-21. Central to talks will be the conflict in Ukraine, with member states eager to highlight a message of unity and resolve in the face of Russia’s continuing aggression.

Fumio Kishida, Japan’s prime minister, made an unannounced visit to Kyiv on March 21, meeting the Ukrainian president Volodymyr Zelenskyy.  This coincided with a visit to Moscow by China’s leader Xi Jinping, who described Russian president Vladimir Putin as a friend and partner.

‘Absolutely unacceptable’

Hosting the G7 summit in Hiroshima is significant, too, with Kishida expected to emphasize the ‘absolutely unacceptable’ threat of nuclear proliferation. Ongoing tensions between China and Taiwan, together with recent North Korean ballistic missile tests, have heightened fears of a breakdown in security in the region.

Meanwhile, President Vladimir Putin’s menacing references to the use of nuclear weapons in Ukraine has raised the prospect of a potentially devastating conflict with NATO. ‘Kishida’s principal goal for the presidency of the G7 is to try to draw the world away from the path of destruction that is another nuclear conflict,’ said Duncan Bartlett, a research associate at SOAS, the School of Oriental and African Studies, in London.

‘Early last year, Putin warned of terrible consequences if NATO and the West interfered in the Ukraine conflict, and that was widely seen as being a nuclear threat. North Korea is also pursuing its nuclear weapons programme, and in February an intercontinental ballistic missile went into the sea just near the northern Japanese island of Hokkaido,’ said Bartlett.

After Russia invaded Ukraine in February 2022, Kishida has taken a firm position on Putin, in line with his G7 peers. President Zelenskyy has addressed the Japanese parliament via video link and Dmytro Kuleba, Ukraine’s minister of foreign affairs, was invited by his Japanese counterpart to a G7 meeting held during the Munich Security Conference earlier this year.

Kishida committed $600 million in financial support to Ukraine and his government may well announce the provision of further non-lethal assistance to Zelenskyy at the summit. The country’s constitution effectively outlaws the export of deadly weapons to foreign forces. On his visit to Kyiv, Kishida promised a further $30 million to Ukraine.

‘Kishida has revised key defence documents and is pursuing a radical and controversial expansion of Japan’s defence budget and capabilities,’ said Hugo Dobson, Professor of Japan’s International Relations at the University of Sheffield.

‘He and his G7 partners have signed historic defence agreements, pledged to strengthen ties or declared the inseparability of their security in light of actual conflict in Ukraine and potential conflict in East Asia. Kishida has linked the two by emphasizing that Ukraine today may be East Asia tomorrow,’ said Dobson.

Aside from security matters, Kishida will at the summit address issues on clean energy, climate change, global health and boosting multilateral cooperation to drive post-pandemic economic recovery.

Invitation to Nagasaki

He is understood to have invited President Joe Biden to visit Nagasaki, where the second of America’s two atomic bombs is estimated to have killed 60,000 people in August 1945. No sitting US president has ever visited the city, and Kishida, who grew up in Hiroshima, may see the visit as an opportunity to boost his flagging domestic approval ratings. It may also serve as a timely reminder to Russia and others that the G7 opposes any future nuclear weapon use.

Alfred C. O. Vertegaal
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Lars Jønson
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Dongmei Cheng
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Datasets

Yue Chen
May 1, 2007; 6:812-819
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Steven A. Carr
Mar 1, 2014; 13:907-917
Technological Innovation and Resources

Michal Bassani-Sternberg
Mar 1, 2015; 14:658-673
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Ilka Wittig
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Ivan Matic
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Hasmik Keshishian
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Jonathan C. Trinidad
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M. Wang
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Amelia C. Peterson
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Staphylococcus aureus adhesion to the host's skin and mucosae enables asymptomatic colonization and the establishment of infection. This process is facilitated by cell wall-anchored adhesins that bind to host ligands. Therapeutics targeting this process could provide significant clinical benefits; however, the development of anti-adhesives requires an in-depth knowledge of adhesion-associated factors and an assay amenable to high-throughput applications. Here, we describe the development of a sensitive and robust whole cell assay to enable the large-scale profiling of S. aureus adhesion to host ligands. To validate the assay, and to gain insight into cellular factors contributing to adhesion, we profiled a sequence-defined S. aureus transposon mutant library, identifying mutants with attenuated adhesion to human-derived fibronectin, keratin, and fibrinogen. Our screening approach was validated by the identification of known adhesion-related proteins, such as the housekeeping sortase responsible for covalently linking adhesins to the cell wall. In addition, we also identified genetic loci that could represent undescribed anti-adhesive targets. To compare and contrast the genetic requirements of adhesion to each host ligand, we generated a S. aureus Genetic Adhesion Network, which identified a core gene set involved in adhesion to all three host ligands, and unique genetic signatures. In summary, this assay will enable high-throughput chemical screens to identify anti-adhesives and our findings provide insight into the target space of such an approach.

Despite its major importance in human health, the metabolic potential of the human gut microbiota is still poorly understood. We have recently shown that biosynthesis of Ruminococcin C (RumC), a novel ribosomally synthesized and posttranslationally modified peptide (RiPP) produced by the commensal bacterium Ruminococcus gnavus, requires two radical SAM enzymes (RumMC1 and RumMC2) catalyzing the formation of four Cα-thioether bridges. These bridges, which are essential for RumC's antibiotic properties against human pathogens such as Clostridium perfringens, define two hairpin domains giving this sactipeptide (sulfur-to-α-carbon thioether–containing peptide) an unusual architecture among natural products. We report here the biochemical and spectroscopic characterizations of RumMC2. EPR spectroscopy and mutagenesis data support that RumMC2 is a member of the large family of SPASM domain radical SAM enzymes characterized by the presence of three [4Fe-4S] clusters. We also demonstrate that this enzyme initiates its reaction by Cα H-atom abstraction and is able to catalyze the formation of nonnatural thioether bonds in engineered peptide substrates. Unexpectedly, our data support the formation of a ketoimine rather than an α,β-dehydro-amino acid intermediate during Cα-thioether bridge LC–MS/MS fragmentation. Finally, we explored the roles of the leader peptide and of the RiPP precursor peptide recognition element, present in myriad RiPP-modifying enzymes. Collectively, our data support a more complex role for the peptide recognition element and the core peptide for the installation of posttranslational modifications in RiPPs than previously anticipated and suggest a possible reaction intermediate for thioether bond formation.

Leukocidin ED (LukED) is a pore-forming toxin produced by Staphylococcus aureus, which lyses host cells and promotes virulence of the bacteria. LukED enables S. aureus to acquire iron by lysing erythrocytes, which depends on targeting the host receptor Duffy antigen receptor for chemokines (DARC). The toxin also targets DARC on the endothelium, contributing to the lethality observed during bloodstream infection in mice. LukED is comprised of two monomers: LukE and LukD. LukE binds to DARC and facilitates hemolysis, but the closely related Panton–Valentine leukocidin S (LukS-PV) does not bind to DARC and is not hemolytic. The interaction of LukE with DARC and the role this plays in hemolysis are incompletely characterized. To determine the domain(s) of LukE that are critical for DARC binding, we studied the hemolytic function of LukE–LukS-PV chimeras, in which areas of sequence divergence (divergence regions, or DRs) were swapped between the toxins. We found that two regions of LukE's rim domain contribute to hemolysis, namely residues 57–75 (DR1) and residues 182–196 (DR4). Interestingly, LukE DR1 is sufficient to render LukS-PV capable of DARC binding and hemolysis. Further, LukE, by binding DARC through DR1, promotes the recruitment of LukD to erythrocytes, likely by facilitating LukED oligomer formation. Finally, we show that LukE targets murine Darc through DR1 in vivo to cause host lethality. These findings expand our biochemical understanding of the LukE–DARC interaction and the role that this toxin-receptor pair plays in S. aureus pathophysiology.

HIV Type 1 (HIV-1) and simian immunodeficiency virus (SIV) display differential replication kinetics in macrophages. This is because high expression levels of the active host deoxynucleotide triphosphohydrolase sterile α motif domain and histidine-aspartate domain–containing protein 1 (SAMHD1) deplete intracellular dNTPs, which restrict HIV-1 reverse transcription, and result in a restrictive infection in this myeloid cell type. Some SIVs overcome SAMHD1 restriction using viral protein X (Vpx), a viral accessory protein that induces proteasomal degradation of SAMHD1, increasing cellular dNTP concentrations and enabling efficient proviral DNA synthesis. We previously reported that SAMHD1-noncounteracting lentiviruses may have evolved to harbor RT proteins that efficiently polymerize DNA, even at low dNTP concentrations, to circumvent SAMHD1 restriction. Here we investigated whether RTs from SIVmac239 virus lacking a Vpx protein evolve during in vivo infection to more efficiently synthesize DNA at the low dNTP concentrations found in macrophages. Sequence analysis of RTs cloned from Vpx (+) and Vpx (−) SIVmac239–infected animals revealed that Vpx (−) RTs contained more extensive mutations than Vpx (+) RTs. Although the amino acid substitutions were dispersed indiscriminately across the protein, steady-state and pre-steady-state analysis demonstrated that selected SIVmac239 Vpx (−) RTs are characterized by higher catalytic efficiency and incorporation efficiency values than RTs cloned from SIVmac239 Vpx (+) infections. Overall, this study supports the possibility that the loss of Vpx may generate in vivo SIVmac239 RT variants that can counteract the limited availability of dNTP substrate in macrophages.

Candida albicans and Aspergillus fumigatus are dangerous fungal pathogens with high morbidity and mortality, particularly in immunocompromised patients. Innate immune-mediated programmed cell death (pyroptosis, apoptosis, necroptosis) is an integral part of host defense against pathogens. Inflammasomes, which are canonically formed upstream of pyroptosis, have been characterized as key mediators of fungal sensing and drivers of proinflammatory responses. However, the specific cell death pathways and key upstream sensors activated in the context of Candida and Aspergillus infections are unknown. Here, we report that C. albicans and A. fumigatus infection induced inflammatory programmed cell death in the form of pyroptosis, apoptosis, and necroptosis (PANoptosis). Further, we identified the innate immune sensor Z-DNA binding protein 1 (ZBP1) as the apical sensor of fungal infection responsible for activating the inflammasome/pyroptosis, apoptosis, and necroptosis. The Zα2 domain of ZBP1 was required to promote this inflammasome activation and PANoptosis. Overall, our results demonstrate that C. albicans and A. fumigatus induce PANoptosis and that ZBP1 plays a vital role in inflammasome activation and PANoptosis in response to fungal pathogens.