At the Intersection of Geopolitics and Geoeconomics

February 18, 2023 | Volume 6, Issue 2 | The BlackSummit Team

Here is a summary of important events that unfolded over the last month, and which may affect economic, financial, and geopolitical issues in the months ahead:

North America

• The shooting down of multiple balloons and other unidentified objects flying in US airspace has heightened US-China tensions over the last two weeks. US officials have alleged that China has launched a fleet of surveillance balloons over five continents. Japan and India are among other nations that have also reported cases of suspect balloons flying over their nations. China has since lodged a formal complaint with the US embassy in Beijing and US Secretary of State Antony Blinken has canceled a planned trip to China.

• American and Indian government officials have unveiled plans to enhance cooperation in military-related industries, specifically in the Indo-Pacific region. Key military provisions are cooperation on developing jet engines, specifically by General Electric, and military munitions technology. The meetings fell under the Critical and Emerging Technology (iCET) framework, established by US President Joe Biden and Indian Prime Minister Narendra Modi last year, to bring together government and business officials on military and non-military technology issues. Also this month, Air India agreed to purchase 470 jets from Boeing in one of the world’s largest aviation deals ever. President Joe Biden said the $34 billion purchase will support over one million US jobs.

• The Philippines has agreed to provide the US with expanded access to its military bases, broadening US-Filipino cooperation under 2014’s Enhanced Defense Cooperation Agreement (EDCA). The move will expand the US strategic position in the region as tensions with China continue to mount over Taiwan and territorial disputes in the South China Sea. The moves come as a reversal of the trend under former president Rodrigo Duterte, who was moving closer to China. China has criticized the move as heightening tensions in the region and threatening regional peace and stability.

• In response to Canadian tariff rate quotas (TRQs), which limit the export of American dairy products into Canada, the US has set up a dispute settlement panel to enforce trade provisions under the USMCA trade agreement for American dairy exports, such as milk, butter, yogurt, and ice cream. Although Canada revised their TRQ measures in response, the US position is that issues at the core of that ruling remain unresolved.

Europe

• Over the last month, Russia stepped up its offensive against Ukraine, specifically targeting Ukrainian infrastructure. As the war continues, Ukrainian President Volodymyr Zelensky has been visiting his European allies pleading for support. Western countries have pledged additional aid and military equipment to Ukraine this month, including the delivery of German Leopard 2 tanks. Additionally, the European Union (EU) has stepped up sanctions against Russia’s war machine, banning the import of diesel fuel and other refined oil products from Russia, and setting a price cap on Russian oil. In response to the sanctions, Russia announced it would cut its oil output by 500,000 barrels, or around 5% of Russian oil production. The global price of oil has risen as traders anticipate tightening supplies.

• Multiple high-ranking Ukrainian officials have been dismissed or resigned over allegations of corruption, including Zelensky’s deputy chief of staff and the deputy defense minister, among others. The anticorruption effort comes amidst an increased Ukrainian push for EU membership, with anticorruption one of the key provisions for joining the EU. The push likewise comes amidst a backdrop of growing Republican skepticism for aiding Ukraine, as concerns over the misuse of US aid disbursements grow. While the dismissals raise questions regarding the potential use and misuse of US funds, White House officials nonetheless are pointing to the move as proof that Ukraine is serious about fighting corruption.

• Germany and Oman are reportedly in advanced talks to sign a 10-year deal for liquefied natural gas (LNG) in a bid to replace Russian energy supplies to the German market. The deal would encompass .5 – 1 million tons per annum (mtpa) of natural gas over the contract’s lifespan. German energy giant Uniper and the Omani Economic Minister are said to be involved in the talks. While a deal would represent a positive step in Germany’s bid to replace Russian energy, the deal alone would be insufficient to remedy Berlin’s current energy crisis.

• Petr Pavel, a retired general and former chairman of NATO’s military committee won the Czech presidential runoff with 58.3% of the vote compared to populist Andrej Babis’ 42.7%. He is viewed as being strong on foreign policy and has already expressed strong support for Czechia’s NATO commitments. While the president has little executive power, the president is nonetheless tasked with the key responsibility of picking the prime minister, which is the head of government in the Czech Republic.

Asia, Eurasia, & the Pacific 

• Turkey and Syria experienced a magnitude 7.8 earthquake, followed by a second of 7.5 magnitude, completely devastating both countries. The death toll, as of Friday’s estimates, is nearing 44,000 with more than 100,000 injured. Miraculously, international rescue teams have found survivors in the rubble even days after the earthquakes. Significant damage to infrastructure across the affected regions has been recorded, while hundreds of thousands of individuals have become homeless due to the destruction. Humanitarian aid has begun flowing to assist victims, including $85 million to be disbursed through USAID and an appeal from the World Health Organization for $84.5 million to address the crisis.

• Japanese and Filipino leaders agreed on Thursday to boost their defense ties, allowing greater access for Japanese troops on Philippine territory as tensions with China rise in the Asia-Pacific region. The move comes shortly after the Philippines and the US announced increased basing access for US troops on the islands. Separately, discussions have begun on a potential trilateral defense pact between the US, Japan, and the Philippines to bring the three countries more deeply into alignment; however, these discussions are in the early stages.

• India’s Adani Group, which continues to deny any wrongdoing, has begun taking countermeasures to stymy the fallout from Hindenburg Research’s report. Earlier this month, the research group released a report claiming the multinational conglomerate improperly used offshore tax havens and manipulated stocks. The report has prompted calls for a formal investigation from opposition party lawmakers who are skeptical of the Adani Group’s close relationship with Prime Minister Narendra Modi. The Adani Group has hired Grant Thornton to conduct independent audits to discredit the report. Simultaneously, an Indian regulator has confirmed that investigations have begun and are ongoing in response to the report. While concerns have abounded that the Adani stock rout could spark financial contagion in India’s markets, the markets have nonetheless remained stable so far.

•  Myanmar’s military regime has extended the nationwide state of emergency for another six months, delaying elections that were expected to take place in August. State media has reported that the extension comes in response to increasing challenges posed by armed resistance groups and civil protests. The extended emergency powers grant the military control over all government functions until elections take place. Despite repeated criticism from the international community, the military regime has retained control of the country since the civilian government was ousted in February 2021.

Continue reading news from the Middle East, Latin America, and Sub-Saharan Africa