At the Intersection of Geopolitics and Geoeconomics

January 16, 2024 | Volume 7, Issue 1 | 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 United States and China engaged in two days of high-level military talks in Washington, marking the latest step in the resumed military-to-military ties agreed upon by Presidents Joe Biden and Xi Jinping after a hiatus triggered by Nancy Pelosi’s visit to Taiwan in August 2022. Recognizing the importance of communication to prevent miscalculations escalating into conflict, Pentagon officials emphasized the need for ongoing dialogue. China expressed its commitment to cultivating healthy military relations with the US, urging a reduction in military deployment and provocative actions in the South China Sea, adherence to the one-China principle, and cessation of arms support to Taiwan. US officials, however, cautioned that building functional dialogue may require time despite the restoration of some military communications.

• House and Senate leaders have agreed on a short-term spending deal to prevent a government shutdown, extending funding until March and pushing deadlines for various departments to March 1st and March 8th. The short-term bill requires passage in both chambers by January 19th to avert a partial government shutdown. While some hard-right Republicans oppose the spending deal, moderate Democrats express a willingness to support the Republican Speaker Johnson’s speakership amid internal tensions in the House Republicans. Congressional Democrats have lauded the spending agreement announced over the weekend.

• US Secretary of State Antony Blinken, concluding his regional tour in the Middle East, emphasized that providing a pathway to a Palestinian state is crucial for stabilizing the broader region and isolating Iran and its proxies. Blinken, navigating tensions between Israel and Arab states, sought a resolution to the Gaza conflict, with concerns about its potential spread to Lebanon, Iraq, and Red Sea shipping lanes. Following warnings from Egypt and Jordan, Blinken presented a tentative agreement to Israel, involving support from Muslim-majority neighbors for Gaza’s rehabilitation and continued economic integration, contingent on Israel’s commitment to eventually allow the establishment of an independent Palestinian state.

• Mexico announced on Wednesday that it had reached unspecified “important” agreements with the United States during talks focused on addressing the record-high migration, a key concern in the upcoming US elections. Mexican Foreign Minister Alicia Barcena advocated for the easing of any remaining restrictions on cross-border trade. The Biden administration seeks collaboration with Mexican President Andres Manuel Lopez Obrador to address the surge in migrants attempting to enter the US from Mexico, a critical issue in Biden’s re-election bid. While Lopez Obrador celebrated important agreements from the talks, no details were disclosed. In response to migratory pressures, he urged US lawmakers to invest in helping the poor in Latin America and the Caribbean rather than resorting to barriers and walls.

Europe

• The war between Ukraine and Russia is still ongoing, with no clear route to a cessation of hostilities as the war approaches its second anniversary. In the past month, the country has suffered more missile attacks against civilian infrastructure from Russia, including the nation’s capital, Kyiv. Ukrainian forces have made a few high-profile achievements, such as successfully attacking a Russian warship at port in Crimea and a spy plane over the Azov Sea, but have also lost territory in the country’s east, losing its grip on some of its wins from counteroffensives earlier in the war. The country also has to worry about lagging Western support, as policymakers in the US argue about the merits of supporting Ukraine, a debate which has been augmented by a Pentagon report that says nearly 40,000 weapons sent as military aid were not properly tracked. Ukrainian representatives attending Davos, the annual meeting place in Switzerland for the World Economic Forum, are currently trying to bring Ukraine back into the spotlight amid other conflicts around the world becoming more salient in global discussions.

• The Turkish parliament’s foreign affairs commission has approved Sweden’s NATO membership bid, overcoming 19 months of delays during which Ankara sought security-related concessions. All NATO members, including Turkey, are required to endorse new memberships. Turkish President Erdogan initially objected to Sweden and Finland’s requests last year, citing concerns over their alleged support for individuals Turkey accuses of terrorism. While Turkey ratified Finland’s bid earlier, it delayed Sweden’s approval until the latter addressed concerns related to the Kurdistan Workers’ Party (PKK). In response, Sweden criminalized membership in terrorist organizations. Additionally, Sweden relaxed arms-export policies affecting Turkey. Turkey is seen as the primary obstacle to Sweden’s NATO membership, with Erdogan linking approval to the US selling F-16 fighter jets to Turkey.

• European Union (EU) leaders and officials celebrated a breakthrough in talks on new migration rules, focusing on the core political elements of the Pact on Asylum and Migration. The pact, proposed in September 2020, aims to address challenges arising from past migrant arrivals. The agreement determines which EU countries handle asylum applications, outlines procedures, and mandates support for nations facing difficulties in migrant crises. Critics argue that the reforms may compromise asylum-seekers’ rights and lead to questionable deals with countries people leave to reach Europe.  In recent years, the EU explored outsourcing migration challenges by providing incentives to countries people leave or transit through to reach Europe. While this new deal is not final, a comprehensive agreement on all 10 parts of the reform pact is required by February for it to enter force before the June 6-9th elections.

• Romania and Bulgaria are set to join Europe’s Schengen border-free zone by air and sea by March, following Austria’s agreement to their entry in stages. Currently comprising 27 countries allowing free movement, the Schengen area will now include the two Balkan states, with discussions continuing next year on opening land borders. Austria, initially opposed to expansion due to concerns about illegal immigration, proposed the concept of “Air Schengen” as a precursor to easing land border restrictions. Vienna is willing to relax air travel rules for Romania and Bulgaria if Brussels takes measures to strengthen the EU’s external borders.

Asia, Eurasia, & the Pacific

• Taiwan’s ruling Democratic Progressive Party (DPP) secured a historic third consecutive presidential victory as voters dismissed China’s warnings of increased conflict risk. Lai Ching-te, the current vice president, emerged as the winning candidate. Post-election, China swiftly reiterated its claim that Taiwan is part of China. The election campaign revolved around the island’s complex relationship with mainland China. The result reflects the electorate’s support for the DPP’s stance, considering Taiwan a de facto sovereign nation, urging strengthened defenses against China’s threats, and fostering ties with democratic nations. The outcome also marks a rejection of Xi Jinping’s assertive tactics towards Taiwan, emphasizing the island’s eventual “reunification” with the mainland as a historical inevitability. China’s Taiwan Affairs Office downplayed the result, stating it “does not represent the mainstream view on the island.

• Myanmar’s military and an alliance of armed ethnic minority groups have announced a China-mediated ceasefire, following months of conflict that posed a significant threat to the junta since its seizure of power in 2021. The fighting, which began in October when the alliance launched an offensive against the junta, has resulted in hundreds of deaths and displaced over half a million people. The alliance, controlling key towns and border hubs in Myanmar’s northern Shan state crucial for trade with China, engaged in talks mediated by China in Kunming, Yunnan province. China’s strained relationship with the junta, particularly over its failure to address online scam operations targeting Chinese citizens, added complexity to the situation. After an artillery shell reportedly caused casualties across Myanmar’s border with China, Beijing expressed strong dissatisfaction and vowed necessary measures to protect its citizens. 

• The leaders of the Philippines and Indonesia met in Manila to discuss various issues, including developments in the South China Sea and efforts to strengthen ties among Southeast Asian nations. China’s claims in the South China Sea, which overlap with those of Brunei, Indonesia, Malaysia, the Philippines, and Vietnam, were among the topics. While specific details were not provided, the leaders focused on building cooperation within the Association of Southeast Asian Nations (ASEAN). The two nations signed an energy ties pact to enhance collaboration during critical supply constraints, and agreements were made to reinforce defense ties and existing border cooperation pacts. Despite long-standing efforts, progress on establishing a framework for the code of conduct in the South China Sea has been slow due to disagreements between the parties involved.

• North Korea fired over 200 artillery rounds near a disputed maritime border with South Korea, leading to heightened tension and prompting the South to conduct live-fire drills in response. North Korea justified the firing drills as a “natural response” to perceived military actions by South Korea, referring to them as “military gangsters.” The exchange led to evacuations on South Korean islands, with residents seeking shelter. Despite the firings by North Korea, there were no reported damages in the South. China, North Korea’s main political ally, called for restraint and urged both sides to resume dialogue. The situation has escalated in recent days, with North Korea warning of a potential spiral towards war due to perceived provocative moves by the US and South Korean militaries.

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