At the Intersection of Geopolitics and Geoeconomics

March 21, 2023 | Volume 6, Issue 3 | 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 Federal Reserve is stepping up to calm fears of financial instability after the respective collapses of Silicon Valley Bank (SVB), Signature Bank, and First Republic spread fears of financial contagion. In a deal promoted by the Federal Reserve and Treasury Department, 11 of the US’ largest banks came together to form a rescue plan for First Republic Bank. Just a few days before, the fallout of SVB and Signature Bank due to a wave of withdrawals was successfully contained after the Federal Deposit Insurance Corporation (FDIC) promised to make depositors whole again. In other measures to dispel the crisis of confidence, Treasury Secretary Janet Yellen assured the Senate Finance Committee late last week that the US banking system is healthy, and the Federal Reserve joined the central banks of Canada, England, Japan, Switzerland, and Europe in increasing the frequency of dollar auctions to daily, improving the global access to dollar liquidity.

• Chinese President Xi Jinping aired grievances against the US during China’s annual National People’s Congress, claiming that the US is leading a concerted effort to contain and suppress China’s development. Beijing has criticized the US’s Indo-Pacific strategy as an effort to create an Asian version of NATO and has condemned the actions the US is taking to suppress China’s chip industry. Also this month, the new Special House Committee on China kicked off its work as China and the US enter “an existential struggle over what life will look like in the 21st century.”

• Across over 100 cities in Mexico, more than 100,000 citizens protested a newly passed law to cut the national elections agency’s budget. Demonstrators are calling the measure an effort by Mexican President Andrés Manuel López Obrador (AMLO) to weaken the country’s democracy. In support of the election agency, which helped bring an end to Mexico’s one-party rule 20 years ago, protesters wore pink – the official color of the electoral watchdog – and chanted “Don’t touch our vote.” Mexico’s Supreme Court will hear a challenge to the overhaul in the coming months.

• US Secretary of State Antony Blinken began an African tour last week, beginning in Ethiopia to support the country’s peace process and emphasize the Biden administration’s goals of increasing US engagement in Africa. Secretary Blinken also traveled to Niger where he touted the Sahel country as “a model of resilience, a model of democracy, a model of cooperation” and spoke against the expansion of Russian mercenaries in the region. While in Niger, he announced $150 million in direct assistance to the Sahel, a region that has been plagued by military coups and violence from Islamic extremist groups.

Europe

• As the one-year anniversary of Russia’s invasion of Ukraine came and went, Ukraine’s Western allies stepped up their support. To mark the anniversary, the United Nations General Assembly passed a resolution calling for Russia to withdraw its troops and US President Joe Biden made a surprise visit to Ukraine prior to the White House announcing $2 billion in new military aid and new sanctions. Last week, Poland and Slovakia announced plans to send MiG-29 fighter jets to Ukraine, becoming the first NATO country to send warplanes. Meanwhile, the International Criminal Court (ICC) announced that it had issued an arrest warrant for Russian President Vladimir Putin for war crimes, specifically against children. On the other hand, Chinese President Xi Jinping traveled to Moscow this week to visit his “dear friend” Putin and promote their close ties.

•  French President Emmanuel Macron’s government survived two no-confidence votes yesterday that were triggered by the president pushing through a bill to increase the retirement age from 62 to 64. The bill will now become law despite the grumblings of opposition lawmakers and the protests of thousands in France who have been demonstrating against the measure for weeks.

• The European Union (EU) announced its own subsidies plan earlier this month that will rival the US’ Inflation Reduction Act. Under the new plan, green industries in the EU will be eligible to receive subsidies that “match” those offered outside of the bloc. To prevent wealthier European nations from monopolizing the subsidies and developing their green industries to the detriment of other member states, the green subsidies must be requested by a lower-income country or by a group of three countries, two of which are from a less wealthy region. The move was made to prevent companies from leaving the EU and moving to the US for the subsidy benefits offered by the Inflation Reduction Act. 

• The United Kingdom (UK) and the EU have secured a deal to end their dispute over the post-Brexit fate of the Northern Ireland protocol. The ease of trade between the Republic of Ireland and Northern Ireland, which was threatened by Brexit, was an important part of putting an end to the island’s troubled political history. The new deal, called the Windsor Framework, hopes to settle the dispute by reducing the number of checks on goods entering Northern Ireland.

• Protests broke out in the country of Georgia this month after lawmakers proposed a Russian-style “foreign agents” bill that would have required any organization receiving 20% or more of its funding from abroad to register as a foreign agent or suffer fines, mirroring a law passed by Russia that was used to greatly suppress the activity of non-governmental organizations in the country. During the protests, Georgian security forces used tear gas and water cannons to beat back the protestors, some of whom attempted to storm the parliament. However, due to the unrest, the bill was shot down in parliament in a 35-1 vote.

Asia, Eurasia, & the Pacific

• The US, UK, and Australia have unveiled the details of their plan to build a fleet of nuclear-powered submarines aimed at countering China in the Indo-Pacific. Australia will be given three nuclear submarines from the US, and the allies will begin to construct new state-of-the-art vessels. The announcement comes at the same time the UK is increasing its defense spending by $6 billion, citing the growing threat of China and Russia as the driving force of the increase. The new spending would increase the country’s defense budget from 2.2% of its GDP to 2.5% by 2025.

• For the first time in 12 years, Japanese Prime Minister Kishida met with South Korean President Yoon Suk-yeol to repair relations between the two countries. In the spirit of goodwill, Japan lifted export controls on South Korea prior to the meeting, while South Korea dropped a WTO complaint it had filed against Japan. At the Tokyo summit, the leaders announced new cooperation on intelligence sharing and trade, and also vowed to cooperate against the growing threat of North Korea. 

• Australian Prime Minister Anthony Albanese and Indian Prime Minister Narendra Modi have announced their intention to conclude the Comprehensive Economic Cooperation Agreement by the end of 2023. The ambitious agreement has been stuck in negotiations for over a decade. The two leaders also spoke about strengthening defense ties between their countries to counter China’s growing threat in the Indo-Pacific region.

• Sri Lanka’s election commission announced April 25^th as the date for local government elections. The elections had been delayed by a lack of funds, given the country’s dire cash shortage. The announcement comes after large protests that swept the country last year forced the former president to resign. Sri Lanka has endured one of the worst economic crises in its history since early 2022, leaving the country with shortages of basic necessities. The weakness of the new government threatens the country’s ability to implement critical economic reforms which would alleviate the crisis.

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