This week we are giving emphasis to important actors that are emerging on the global stage, namely India and the Middle East’s Gulf states. India is leveraging both its relationship with the West and its BRICS allies to improve their economy and seek greater leadership on the global stage. Similarly, the Gulf states are balancing their partnerships with the West and BRICS to reshape the Middle East according to their vision. Meanwhile, the US and EU are grappling with Chinese competition in multiple sectors, including steel and EVs. Finally, we end this week’s newsletter by looking at the status of global climate action as the Summer of 2023 becomes the world’s hottest year on record.

India’s Ascent

India’s Quiet Rise

Brahma Chellaney, Project Syndicate

India’s Moment Has Arrived, and Modi Wants a New Global Order

Sudhi Ranjan Sen, Bloomberg

India may soon have its moment in the sun. Its recent accomplishments are impressive: its economy grew at a 7.8% annual rate in 2023’s second quarter, it became the first country to land a spacecraft on the Moon’s south pole, and it recently hosted the Group of 20 (G20) summit in New Delhi. The country has overtaken the United Kingdom’s GDP, and it is expected to do the same to Japan and Germany by 2030 to become the world’s third-largest economy. Its rise in power and prestige comes alongside a string of bad news coming out of its neighbor, China. India’s population recently surpassed China’s, and China’s recent economic slowdown has hindered it even more. It should be no surprise that India is leveraging its unique position during this period of geopolitical competition. The war in Ukraine has allowed India to get greatly-discounted Russian oil, and China’s competition with the US has Western countries courting New Delhi. India has dipped its toes in both realms; it cooperates militarily with the West in the Indo-Pacific with the Quad Alliance and is also a founding member of BRICS, the economic bloc that seeks to reshape the global order. In order to continue its growth in power and prestige, however, India must contend with the rising Hindu nationalism often fanned by its own Prime Minister, Narendra Modi. Ultimately, India’s path forward relies on how deftly it can navigate the fraught waters of great power competition.

The Gulf countries want to reshape the Middle East in their image

The Economist

Middle Eastern countries, particularly Gulf states, are in the driver’s seat as the region steers its future course. That future is increasingly shaped with an economics-first outlook, as ideological drivers such as democracy or Islamization take a backseat to prosperity. To that end, Saudi Arabia, Egypt, the United Arab Emirates (UAE), and Iran have been invited to join BRICS, signaling a move away from the West that is in line with trading trends as trade with countries such as the US and in the European Union have declined while trade with China and India have rapidly expanded. As such, the trends of growing distance between the US and the Middle East, and an emphasis on oil and gas exploitation and trade to build up reserves and transition to new business, are set to continue and broaden, especially as the Middle East experiences a period of relative calm in geopolitics and political unrest.

Yet, instability, be it geopolitical like the Saudi-Iranian rivalry, or domestic as seen in civil wars in Syria, Yemen, Libya, and South Sudan, may still set these countries back in achieving their economic goals. Internal trends, such as low foreign direct investment, large and well-paid public sector workers in Gulf countries, and difficulty in transitioning away from a hydrocarbon-based economy may also prove liabilities in the long run. Should these countries prove savvy politically and economically, they may ultimately succeed, but the future, as always, remains uncertain.

The US and the EU Grapple With Chinese Competition

US, EU Plan New Chinese Steel Tariffs in Bid to End Trump-Era Trade Conflict

Alberto Nardelli & Jenny Leonard, Bloomberg       

‘We have to fight’: Europe’s carmakers dig in against China’s EV incursion

Peter Campbell & Patricia Nilsson, Financial Times

The US and Europe are facing off against Chinese competition in a number of arenas, and the auto industry and steel are two important ones to watch. In regards to steel, the US and the EU have been negotiating over putting a Trump-era steel trade conflict behind them in the face of excess steel production from China, among others. As part of the agreement being negotiated, the US and EU are reportedly discussing new tariffs aimed at excess steel production from China and other countries. Despite the Biden administration and the EU agreeing to pause tariffs on each other’s goods in 2021 and setting a deadline for October 31st of 2023 to find a solution, the two sides have not come to a final deal yet. If they are unable to find a solution, tariffs would automatically resume on over $10 billion of metals exports. While both sides have expressed optimism in finding an agreement, analysts don’t expect anything binding, due to differences between how carbon emissions are measured and regulated between the US and the EU. Chinese steelmakers, on the other hand, have been exporting more this year due to weak domestic demand. The yuan’s fall relative to the dollar has made Chinese steel even more attractive.

Europe’s carmakers face similar tough competition. At this year’s Munich motor show, Chinese carmakers took up almost two-thirds of floor space, highlighting the degree to which the firms can compete against expensive European companies. Chinese car manufacturers have placed significant focus on their electric vehicles (EVs), which are particularly attractive compared to domestic manufacturers’ models as a ban on gas and diesel cars by 2035 in the region looms. Europe has one of the world’s most expensive car markets of the world, and many of its domestic brands are luxury brands. Still, Chinese carmakers have yet to achieve significant market share, and many executives believe it will be a long time before they do. Additionally, Chinese firms are realistic about the difficulty of gaining a foothold in the auto world’s most competitive region.

A Warming Climate

Climate Report Card Says Countries Are Trying, but Urgently Need Improvement

Brad Plumer, The New York Times

‘Smashed’: summer of 2023 the hottest ever recorded

Betsy Reeds, The Guardian

Since the Paris Climate Accords were agreed in 2015, only limited progress has been made in staving off the worst effects of climate change. Politics certainly plays a role, as nations disagree over who should cut and by how much. For instance, America and Europe point to China as the largest emitter, yet China and many other developing nations point towards the US and wealthy European nations, given their position in the world economy. The result is the target 1.5C window is rapidly closing and the world is moving towards a 2.5C increase overall by 2100.

Meanwhile, the summer of 2023 was the hottest since record keeping began, with August being about 1.5C above preindustrial levels on average. While the 1.5C marker would only be broken were such temperatures to be sustained, it shows a watermark of where global warming is trending. In fact, the global average temperature this year was 16.77C, which is .66C higher than the average between 1991 – 2020. As a result, heatwaves, fires, and floods, which proved deadly this year, may become all the more frequent and disastrous as time moves forwards.