At the Intersection of Geopolitics and Geoeconomics

September 12, 2023 | Volume 6, Issue 8 | 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

  • US Commerce Secretary Gina Raimondo has finished her visit to Shanghai and Beijing with a pledge from China to restore formal communication channels between Washington and Beijing. While the agreement seems minimal, the arrangement nonetheless moves the needle productively between the world’s two biggest economies, as communication has increasingly broken down. No indication was given by either side that any restrictions imposed on trade would be reversed at this time.
  • US Secretary of State Antony Blinken made a surprise visit to Kyiv to signal Washington’s long-term support for the country as it continues to defend its territory against Russian incursion. The trip included a pledge of $1 billion in additional aid for Ukraine, while coming amidst the backdrop of Ukraine’s prolonged and difficult offensive in the South and East of the country. The move likewise comes at a time of increasing uncertainty over the US’ long-term commitment to supporting Ukraine, which may become increasingly constrained in the runup to next year’s presidential election.
  • A record number of migrant families have crossed the US-Mexico border, with at least 91,000 arrests by US Border Patrol reported. The surge represents the highest level of family migration, breaking the record set in May 2019 of 84,486 migrant families, and comes on the heels of reports that US officials have welded open massive gates along the Arizona border. Customs and Border patrol reportedly have encountered upwards of 230,000 migrants in August, which is the largest one-month total of 2023.
  • The Biden administration has stopped helping states rebuild from past disasters as disaster relief funds become critically low due to storms and wildfires that have drained federal coffers throughout the past year. The new restrictions ensure that funding from the Federal Emergency Management Agency (FEMA) will go only towards emergency life-saving measures. In response, the administration has requested $12 billion in emergency money to replace the disaster relief fund. FEMA has imposed similar restrictions eight times since 2001.

Europe

  • The past month has seen a number of developments with regard to Ukraine. First, following a meeting with Turkish President Recep Tayyip Erdogan in Sochi, Russian President Vladimir Putin persisted in his refusal to reenter the Black Sea Grain Initiative, stating that Russia will only reenter the deal if Western countries lift restrictions on Russian agricultural exports. Second, Ukraine has replaced Defense Minister Oleksii Reznikov with Rustem Umerov, a Crimean Tatar born in Uzbekistan, who is not seen as tainted by corruption. Third, Russia continued strikes across Ukraine, recently hitting both Kyiv and Odessa, while Ukraine has made slow progress as it bumps against the first line of Russia’s echeloned defensive structure in the southeast Zaporizhzhia region around the villages of Robotyne and Verbove.
  • Yevgeniy Prigozhin, leader and owner of the Russian private military firm the Wagner Group, was confirmed by the Russian government as aboard a plane carrying high-ranking Wagner leadership that crashed northwest of Moscow, killing everyone aboard. US government officials have released preliminary findings suggesting that some form of sabotage, such as a bomb detonation, downed the plane. The Russian government has opened a case into the incident while denying accusations that Russian President Vladimir Putin had ordered the assassination in retaliation for the Wagner mutiny that saw Wagner forces march on Moscow.
  • The United Kingdom’s Foreign Secretary James Cleverly visited Beijing for the first time in five years to meet with senior Chinese government officials and reinforce business ties, while downplaying differences on other matters such as human rights. Arguing that China is an important nation, he struck a pragmatic stance that the UK can continue to do business with the country while being clear-eyed over differences in the relationship. As such, the British government is set to send its largest business delegation to Beijing in the last few years, with about 60 British companies and organizations set to attend China’s international fair for trade in services next month.
  • The European Union has designated its first six gatekeepers under the Digital Markets Act: Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. The act was passed to support healthy competition in the tech market in the European Union and beyond the gatekeeper designations themselves, also released a list of 22 core services that justified the gatekeeper status. Companies labeled as gatekeepers can appeal the decision to the commission and supply arguments in their defense, which the European Commission can use to determine if an appeal is merited. The designation stipulates that these platforms cannot favor their own services over rivals’, will be prevented from combining personal data across different services, and finally will have to offer options for users to download apps from alternative platforms.

Asia, Eurasia, & the Pacific

  • China has begun implementing reforms with the goal of arresting and reversing its economic slowdown to get the country back on track for strong growth. The measures are expected to positively impact the property sector while supporting a stronger yuan. Specific measures include actions taken by the People’s Bank of China to ease borrowing rules while slashing its reserve requirement for foreign exchange deposits from 6% to 4%. Additionally, some of the country’s largest banks have also cut interest rates on yuan deposits.
  • Leaders of North Korea and Russia, Kim Jong Un and Vladimir Putin, are expected to meet in Vladivostok to mark the 75th anniversary of North Korea’s founding. The meeting furthers a trend of deepening cooperation between the two countries. The Russian president is expected to seek ammunition and other weaponry from North Korea, with North Korea seeking advanced satellite and nuclear-submarine technology in return. The meeting comes on the heels of suspected technology sharing between North Korea and Russia on Russian ICBM technology, affording North Korea nuclear strike capabilities on the continental US.
  • Japanese officials have reacted strongly to a Chinese ban on Japanese seafood, with some officials signaling that the country may file a complaint to the World Trade Organization (WTO). The Chinese ban on imports pertains to health concerns over the release of treated radioactive water from the Fukushima nuclear reactor into the Pacific, which has likewise alarmed consumers in other countries, such as South Korea. Japan is prepared to explain the safety of treated water released to the relevant WTO committees, as well as to other nations at the G-20 and ASEAN summit in Indonesia.
  • Thailand elected real estate mogul and political newcomer Srettha Thavisin of the populist Pheu Thai party to become the country’s 30th prime minister, averting a potential political crisis after military-backed, conservative members rejected the upstart Move Forward party’s candidate Pita Limjaroenrat. Abetting Pita’s failure to secure a nomination was a suspension handed down to him after the Constitutional Court found him in violation of election law. While Move Forward saw a stunning election success, it failed to gain enough seats to form a government outright, allowing the conservatives to maneuver in Thavisin. In cutting a deal with Pheu Thai, Pheu Thai reversed its position to not work with the military, reversing decades of opposition politics that sought to remove the military from the political scene.

Middle East & North Africa

  • Anti-government protests in Syria’s southwestern city of Sweida have stretched into their third week. Over 2,000 people have taken to the streets to protest repression by al-Assad’s government in a region that has not seen such anti-regime sentiments before. The marches began in mid-August over the end of fuel subsidies, the latest in a series of policies that have exacerbated the economic hardship that Syria endures. Syria’s pound has lost most of its value against the US dollar since the outbreak of civil war in 2011, and Western sanctions have made the situation worse. According to the United Nations, most of the population has been pushed into poverty, and over half a million people have been killed.
  • Pakistan’s interim prime minister announced that Saudi Arabia will invest up to $25 billion in the country over the next two to five years. The investment would go towards the mining, agricultural, and information technology sectors as part of a push to increase foreign direct investment in Pakistan. Pakistan is dealing with a balance-of-payments crisis and needs billions to finance its trade deficit and repay its international debts. Pakistan also said it would continue its program to privatize several state-owned enterprises after it was halted due to the politically unpopular nature of the issue.
  • As talk of a potential US-led initiative to further normalize Saudi-Israeli relations ramps up, the Palestinian Authority (PA) recently laid out terms for its participation in such a deal. The deal needs participation from the PA in order to appease some in Biden’s Democratic Party, who are hostile to any deals that don’t include concessions to Palestine, as well as for the Saudi public, who are sympathetic with the Palestinian’s cause. Palestinian demands include transferring parts of the West Bank from Israeli control to Palestine, a halt of Israeli settlement growth in the West Bank, resuming Saudi financial support for the PA, re-opening the US consulate dedicated to diplomacy with Palestinians in Jerusalem, and resuming US-backed negotiations between Israel and Palestinians.
  • The US, India, Saudi Arabia, and the United Arab Emirates may announce a joint infrastructure deal at the G-20 summit in New Delhi. The deal, which is part of Washington’s efforts to balance Beijing’s influence in the region, aims at connecting Gulf and Arab countries with a railway network and would connect to India through shipping lanes from ports in the region. Proponents of the deal claim that it would bring economic and strategic benefits to all countries involved.

Latin America & the Caribbean

  • Bernardo Arévalo, a sociologist from a fresh political party, won 58% of the votes in Guatemala’s runoff presidential election. He campaigned on fighting corruption and political persecution in Central America’s largest country and Washington’s longtime ally in the region. Arévalo, while being a moderate who criticizes other leftist leaders in the region, is still seen as the most progressive candidate Guatemala has ever seen since democracy was restored in 1985 following three decades of military rule. Arévalo’s campaign, which barely made it into the runoff election, benefited from the outcry after several reformist candidates, including himself, were targeted by prosecutors in order to prevent them from being eligible.
  • The Panama Canal’s authority announced that it would maintain restrictions on daily vessel transit and maximum draft for at least 10 more months as a severe drought has lowered the canal’s water level. The restrictions, imposed earlier this year, have caused a backlog of ships waiting to pass and have forced some owners to lighten cargoes or find different routes in order to pass through. The extended restrictions would give the canal time to preserve water before the next rainy season arrives, but it has increased shipping costs for vessels waiting to cross or forced to find other routes.
  • Chile’s government has announced an initiative, called the National Search Plan, to search for people who disappeared during the rule of the authoritarian General Augusto Pinochet, who left power in 1990. Pinochet, who came to power in a 1973 military coup, oversaw 1,469 disappearances during his 17-year tenure. Critics of successive Chilean governments have claimed that they had failed to seriously search for those who disappeared. While there have been mass graves discovered near former interrogation centers over the years, not all human remains have been examined or identified. There is hope that, with new forensic science, families and friends can, at last, know the fate of their loved ones who were taken.
  • Ecuador voted to halt oil drilling in the Amazon in a historic referendum that coincided with the first round of the country’s presidential election. The referendum is a result of a decade-long campaign by environmentalists to get the issue on the ballot. The presidential election has largely been driven by high unemployment and security concerns as violent crime has increased, especially after presidential candidate Fernando Villavicencio was assassinated on the campaign trail. The two leading candidates are an establishment leftist, Luisa González, and a political outsider Daniel Noboa.

Sub-Saharan Africa

  • The military junta that overthrew Gabon’s President Ali Bongo has announced that it plans to hold elections within the next two years and will come up with an official timetable in the next few days. Bongo had led Gabon since 2009 when he succeeded his father, who had ruled for over 40 years until General Brice Oligui Nguema overthrew him. The coup leaders were said to be motivated to oust Bongo after a highly suspect election declared him the victor. This development follows a wave of coups in former French colonial possessions in recent months, including Mali, Burkina Faso, and Niger.
  • At least 183 people have been killed by clashes in Ethiopia’s Amhara region following a refusal of the local Fano militia to surrender its weapons after the Tigrayan war ended last November. Amnesty International has called on Ethiopia to open access to Amhara for investigators to look into alleged human rights abuses since Addis Ababa declared a state of emergency in Amhara on August 4th. A UN spokesperson expressed concern about the looting and killing of civilians by soldiers in the region, and both the EU and the US have joined in voicing concern of human rights abuses.
  • Zimbabwe’s main opposition candidate, Nelson Chamisa, has claimed that the recent election was marred by “blatant and gigantic fraud” after President Emmerson Mnangagwa won a second term with 52.6% of the vote against Chamisa’s 44%. Mnangagwa’s ZANU-PF party has ruled the country for 43 years in which the country has undergone a severe economic crisis and deepening authoritarianism. The United Nations (UN) expresses concern over an environment of intimidation in Zimbabwe with the arrest of election observers, alleged voter intimidation, threats of violence, harassment, and coercion.
  • African leaders proposed a new financing mechanism to restructure the debt of many African countries and to unlock climate funding at the first Africa Climate Summit, held in Nairobi, Kenya. The leaders also called for greater investment in the clean use of the continent’s natural resources for its transition to low-carbon development. The summit brought global leaders, NGOs, UN agencies, private sector actors, civil society, and other groups to discuss Africa’s climate challenges, as African countries are more vulnerable to the effects of climate change, which include long droughts, floods, and wildfires. The group also said that the Africa Climate Summits should be a biennial event convened by the African Union and hosted by AU members in the future.

Global Events

  • The BRICS economic bloc announced that it would be expanding membership to Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates. The bloc, which included Brazil, Russia, India, China, and South Africa before the announcement, seeks to reshuffle the world order led by the developed world. While the expansion, which will take effect on January 1st of 2024, adds economic heft to the bloc, tensions between countries who want to rally support against the West – including China, Russia, and Iran – and those who still wish to remain close to the US and Europe, could hinder the group’s ambitions to become a major player on the world stage.
  • The leaders of the world’s 20 largest economies ended the G-20 summit in New Delhi, India, this Sunday. The group announced the formal admission of the African Union to make the bloc more inclusive, which made it on par with the European Union. G20 countries put out a declaration agreeing that countries can’t take territory by force and directed attention to the suffering of the Ukrainian people during the war but didn’t directly criticize Russia. Analysts believe that Russia would have never accepted a statement that condemned it directly. India, Brazil, Indonesia, and South Africa are said to have had a hand in keeping the group cohesive when it came to Ukraine. Perhaps the biggest takeaway was the increase in prestige for India, which had the chance to flex its diplomatic and economic muscles during the summit.

Suggested Reading

The Roots of the Global South’s New Resentment

Foreign Affairs

 

The G20 summit will be a resounding success for India

The Economist

We can’t wait 30 more years for another breakthrough in the Middle East

Financial Times

The real message from the BRICS summit

GIS Reports

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