At the Intersection of Geopolitics and Geoeconomics

October 17, 2023 | Volume 6, Issue 9 | 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

• In an unprecedented allegation, Canada accused the Indian government of taking part in the murder of Canadian Sikh activist Hardeep Singh Nijjar. Nijjar supported the creation of an independent Sikh state in the Punjab region of India called Khalistan, and the Indian government had accused him of leading a militant separatist group – a charge that his supporters deny. India has strongly rejected Canada’s allegations and has since called Canada a “safe haven for terrorists,” as the Khalistan independence movement is seen as being strongest in Canada among the country’s Indian diaspora as it has the largest Sikh population outside of India. This diplomatic spat may weaken Western efforts, led by the United States, to draw closer to India amidst rising tensions with China.

• The US avoided a government shutdown when Speaker Kevin McCarthy joined House Democrats to support a stopgap funding bill, a surprising development given his party’s slim majority and the presence of the far-right Freedom Caucus, which promised to oust him after the bill was passed. They followed through, removing him in a 216-210 vote in the first time in history a speaker had been removed. The House has since been in limbo, unable to respond to new developments like the Hamas’ attack on Israel. Many Republicans are now looking at Representative Jim Jordan to become the next speaker, but there are still holdouts. In today’s House vote, Jordan fell short of the majority he needed to secure the speakership, but more rounds of voting are to come. There have also been reports of informal meetings between Republicans and Democrats about establishing a bipartisan coalition.

• American and Mexican officials held talks in Mexico City where the two parties discussed the expansion of the US border wall as well as the arms and drug trade. Mexican officials rejected the plans for new sections of the border wall, which the Biden administration says must be built as the money had already been allocated in 2019 during Trump’s tenure. US officials expressed that the money would also be used for other technologies and installations at the border other than a wall. Officials also pledged to increase cooperation to combat the drug trade, organized crime, and to ease migratory pressures.

• Last month, the US deepened diplomatic relations with both Vietnam and Bahrain. The US has agreed to enter into a “comprehensive strategic partnership” with Vietnam which will mark the US as a partner of the highest order in Vietnam and puts the US into a category reserved until now for just four countries: China, Russia, India, and South Korea. Meanwhile in the Gulf, the US has entered into a security agreement with Bahrain to defend the country from attacks in a bid to counter Iranian influence in the region.

Europe

• Poland’s governing Law and Justice party appears to have won the most votes in Sunday’s election but will lose its majority in the country’s parliament. An opposition coalition of Civic Coalition, the Third Way, and the Left has enough support to form a government, but it would have a difficult time governing; it’s politically diverse with the moderately conservative Third Way, the left-leaning Civic Coalition, and the hard-left Left party. The ruling Law and Justice party has been criticized by opposition and international organizations for eroding the independence of the country’s judiciary and state media. Both President Andrzej Duda and the Law and Justice-sympathetic top court have the ability to veto legislation from the opposition governments, which could complicate matters even further.

• The European Union (EU) sent its top diplomat, Josep Borrell, to Beijing to discuss the flare-up of violence in the Middle East, bilateral ties, and the Ukraine-Russia war. The two parties agreed that the only long-term solution to the Israel-Palestine conflict is a two-state plan. However, the EU criticized China for its failure to take a strong stance against Russian aggression in its invasion of Ukraine, as well as warned that growing trade imbalances between China and the EU would lead to more protectionism. Chinese Foreign Minister Wang Yi claimed that Beijing took Europe’s concerns about trade seriously and that it would send a special envoy to the Middle East soon.

• NATO officials pledged more than $2 billion in additional military aid to Ukraine. Ukrainian President Volodymyr Zelensky visited NATO headquarters last Wednesday to request additional military aid amidst the backdrop of events unfolding in Israel and Palestine. Concern over violence in Israel and the budget fight in US Congress threaten to weaken support and undermine long-term funding for Ukraine as Russia’s offensive continues. Despite these concerns, NATO Secretary General Jens Stoltenberg sought to reassure Zelensky that “[NATO] will stand by Ukraine as long as it takes”

Asia, Eurasia, & the Pacific 

• The chairman of China Evergrande Group, the world’s most-indebted property developer, has been placed under police control. Hui Ka Yan was taken by Chinese police and has reportedly been placed under residential surveillance, a measure just short of being arrested. It also doesn’t mean he will be charged with a crime. However, the crackdown does signify that Evergrande’s fate is more uncertain, as the firm suffered setbacks to its restructuring plans that raised the risk of liquidation. Hui was once considered the most politically connected businessman in China and was in charge when Evergrande’s shares rose to their highest in 2017. The firm is central to an unfolding property crisis that has hampered the Chinese economy and housing market, and it currently faces a hearing in a Hong Kong court that could force it into liquidation.

• The president of the self-declared Nagorno-Karabakh Republic, Samvel Shahramanyan, has declared the dissolution of all state institutions of the breakaway republic by January 1, 2024. The region – an Armenian enclave – has ruled itself, in contravention of its recognition internationally as a part of Azerbaijan, since 1988 and has been at the focal point of armed conflict between Azerbaijan and Armenia since. As a result, as many as 93,000 Armenians from Nagorno-Karabakh have fled the region, with expectations that all 120,000 Armenians may ultimately flee. Though the Nagorno-Karabakh conflict has seemingly come to an end, Azerbaijan may now be setting its gaze on the southern Armenian border provide of Syunik, or what Azeris call “Western Azerbaijan.”

• Sri Lanka said that it had reached an initial deal to restructure its debt with the Export-Import Bank of China, a hurdle that stands in the way of the South Asian country’s eligibility to receive the next tranche of funds from the International Monetary Fund (IMF). Sri Lanka became the first Asia-Pacific country to default on foreign debt, valued at $41 billion, with the most bilateral credit coming from China. The newest preliminary agreement covers around $4 billion of the debt and is the largest single portion owed to Chinese creditors. Talks on restructuring the country’s debt have been complicated, as Sri Lanka’s other creditors formed a committee that China had refused to join. Policymakers have been watching these negotiations closely to see how Beijing would react to debt crises, given its growing importance as a lender to developing countries. Sri Lanka is still in an economic mire after last year’s default left it unable to import fuel, medicine, and even food.

• The IMF bumped up its forecast for India’s growth from 6.1% to 6.3% in 2023, saying that the country’s growth would remain strong through the end of this year and 2024. The strength of the Indian economy has been attributed to a rise in consumption, infrastructure spending, the country’s youthful demographics, a growing middle class, and the expansion of business activity across the country. However, some have warned that rising inflation, climate change-related extreme weather events such as droughts and heatwaves, and geopolitical tensions could hamper the country’s growth. India’s consumer market is projected to be the world’s third-largest by 2027 as incomes rise, and many economists are bullish about the country’s future.

• China’s and India’s Defense Ministries issued a joint statement saying that the two countries would commit to “maintain the peace and tranquility” along their disputed border, a statement that emerged after the 19th round of commander-level talks between the two parties. The statement also claimed that the two sides would aim to resolve the disagreement “in an expeditious manner,” but offered no details about a timetable. China claims around 35 thousand square miles of territory in India’s northeast, and India claims that China occupies 15 thousand square miles of the territory. The two countries fought a war over the dispute in 1962, and armed clashes reoccurred in 1967 and 1975. Violence broke out again in 2020 where 20 Indian soldiers and four Chinese soldiers were killed.

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