At the Intersection of Geopolitics and Geoeconomics

May 11, 2022 | Volume 5, Issue 5| Rachel Poole

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

North America

• The US is doubling down on its support of Ukraine as Russia continues its military offensive. Over the last month, President Joe Biden has asked Congress for an additional $33 billion in aid to Ukraine, and Speaker of the House Nancy Pelosi and First Lady Jill Biden visited Ukraine, demonstrating the US’ continued support. Also this month, unnamed US officials reported that intelligence-sharing assisted Ukraine in sinking Russia’s Moskva warship and allowed Ukrainian forces to target and kill multiple Russian generals. The US continues working with its allies around the world to secure alternative energy supplies for Europe. On Sunday, the US and its allies that are a part of the Group of Seven (G7) announced they will ban Russian oil imports and impose a new wave of sanctions.

• The Biden administration’s Security Advisor Kurt Campbell announced that the administration has invited Pacific Island leaders to the White House later this year to bolster diplomatic relations as well as increase funding for projects in the region. The announcement comes amid concerns over the security implications of China’s expanding presence in the region. Campbell also added that the US would be more intensively focused on regional cooperation with New Zealand, Australia, Japan, Britain, France, and others.

• The US Securities and Exchange Commission (SEC) added over 80 Chinese firms to a list of companies facing delisting. If the companies fail to meet auditing requirements for the next three years, they will be removed from US exchanges. Chinese online retailer JD.com was included in this round of possible delistings, which is the latest in a long-standing battle between China and the US over auditing concerns. US regulators have been demanding complete access to the audit documents of New York-listed Chinese companies, which are stored in China, but their requests have been denied by China on national security grounds.

• As the Summit of Americas hosted by the US in Los Angeles approaches, Mexican President Andres Manual Lopez Obrador, commonly referred to as AMLO, said on Tuesday that he would skip the conference if not all the countries in the region were invited. The comment was a challenge to the Biden administration who is considering excluding Cuba, Nicaragua, and Venezuela from the talks. White House Press Secretary Jen Psaki said a final decision has not been made. The Biden administration has stepped up its criticism of the Cuban government following the arrest of hundreds of protesters last year. The US does not recognize either Venezuelan President Nicolas Maduro or Nicaraguan President Daniel Ortega as legitimate leaders. The summit is an opportunity for the leaders of the Americas to discuss critical issues such as climate change, migration, Covid-19, and the fortification of democracy. If the three countries are not invited to the summit, AMLO will send Foreign Minister Marcelo Ebrard instead.

Europe

• Tensions between Russia and the West continue to escalate. Last month, Russia completely cut off Poland and Bulgaria from its natural gas deliveries in response to what it said was the two countries’ refusal to pay for the gas supplies in rubles. Following Russia’s actions, the European Union (EU) announced it was creating a plan to ban Russian oil imports, phasing them out in the next 6 months and banning refined petroleum products by the end of the year. The oil ban is part of a sixth round of sanctions the EU is preparing against Russia for its invasion of Ukraine. The new sanctions are also expected to exclude several more Russian banks from the SWIFT global interbank messaging system. Russia continues its attack on Ukraine, ramping up military efforts, particularly in the eastern and southern regions. Attempts at a diplomatic resolution to the conflict have failed.

•  Northern Ireland’s pro-unity party, Sinn Fein, won parliamentary elections last week, causing a major shift in leadership. The win for Sinn Fein pushed the Democratic Unionist Party, which favors North Ireland’s status as part of the United Kingdom, into second place in the Assembly for the first time since the 1998 Good Friday Agreement which created the current system under which unionists and nationalists share power. Representatives from each of Northern Ireland’s political parties are due to meet this week to negotiate a power-sharing agreement. Some Unionist politicians, who consider themselves British, have signaled that they may be unwilling to participate in a Sinn Fein-led government. If a government is not formed in 6 months, new elections will be held. With Sinn Fein’s win comes hopes of Irish unity, but also fears of political unrest.

• Sweden and Finland have agreed to submit simultaneous membership applications to join the NATO alliance. The prime ministers of each country reported that they were deliberately considering applying for NATO membership given that the security landscape in Europe has dramatically changed and they must be “prepared for all kinds of actions from Russia”, said Swedish Prime Minister Magdalena Andersson. Andersson and her Finnish counterpart Sanna Marin met with German Chancellor Olaf Scholz last week to discuss NATO membership and their response to Russia’s invasion of Ukraine. The two Nordic countries are expected to submit their application as early as next week.

• Emmanuel Macron defeated his far-right opponent Marine Le Pen, securing a second term as France’s president. The 44-year-old centrist was re-elected with 58.5% percent of the vote. While France’s far-right has risen in the last few years since Macron and Le Pen’s last runoff in 2017, it has not grown enough to upend France’s leadership. The election has been seen as a victory for liberal, pro-European politics over a wave of nationalism that has been spreading. Legislative elections will be held in June, and Macron’s party is expected to retain its majority.

Asia, Eurasia, and the Pacific 

• Amid nationwide anti-government protests, Sri Lanka’s Prime Minister Mahinda Rajapaksa has stepped down. For several weeks, demonstrators have been calling for his resignation as well as for the resignation of his brother, President Gotabaya Rajapaksa. Protesters blame their government for the country’s worst economic crisis since becoming an independent nation. Yesterday, more than 200 people were injured and 7 were killed in clashes between pro- and anti-government protesters outside of Rajapaksa’s home.

• China is tightening lockdown restrictions in response to an uptick in Covid-19 cases. Shanghai has been in lockdown for almost a month and a half, while authorities in Beijing have banned indoor dining, and announced new rounds of mass testing, among other constraints. Economic activity in China declined sharply in April as a result of the zero-Covid measures, and the halt in manufacturing and shipping activity in Shanghai is causing major global supply chain issues. In a meeting on Thursday, Chinese President Xi Jinping underscored the government’s commitment to its zero-Covid policy and warned that it would fight any speech against it. 

• Over the last month, India has deepened its ties with the United Kingdom (UK) and the EU. India and the UK recently signed a defense agreement in which London will support New Delhi’s efforts to design and build its own fighter jets and it will issue a special export license to facilitate weapons procurement. During European Commission President Ursula Von der Leyen’s visit to New Delhi a few weeks ago, the launch of a high-level trade and technology council was announced. At the meeting, the two leaders also said they would enhance cooperation on security matters and begin negotiating free trade agreements. While the war in Ukraine was a topic of discussion, a statement concerning Russia and the conflict was not released. Despite growing pressure on New Delhi to reduce ties with Russia, India has continued to hold talks with Russian officials.

• Ferdinand Marcos Jr., son of the ousted former dictator, won the Philippine’s presidential election in a landslide victory. The daughter of outgoing President Rodrigo Duterte, Sara Duterte, won the vice presidency in a separate election. Thirty-six years ago, his father Ferdinand Marcos Sr. was thrown out of power by a national revolution. Marcos Jr. campaigned on national unity, featuring a social media campaign that depicted the military rule of his father as a time of great prosperity for the country. Given Marcos Jr.’s background and his alliance with Duterte, it is expected that he will continue his predecessor’s warm relations with China.

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