In Geopolitics Today: Wednesday, July 13th

Pakistan and the IMF Reach Agreement on Relief Funds, Progress in Talks Between Russia and Ukraine to Ease Blockade, and other stories.

Pakistan and the IMF Reach Agreement on Relief Funds

Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement that will see the Extended Fund Facility (EFF) programme for Pakistan reinstated. The first tranche is expected to be SDR894 million, equal to $1.2 billion. The program has been extended till July 2023, and total program size increased by $1bn to $7bn

The two sides held several meetings and agreed on the state budget and forthcoming fiscal measures. Since Imran Khan was ousted from power, Islamabad has unveiled a tight budget for 2022-23 in a bid to convince the IMF to restart bailout payments. Khan’s government had introduced fuel price caps which limited Pakistan’s ability to pay the IMF programme. Pakistan’s new government has removed the price caps, with fuel prices now going up for citizens of Pakistan by up to 70% in the weeks since the price cap was lifted.

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Turkey and Turkmenistan Negotiating a Gas Transit Deal

Turkish Vice President Fuat Oktay announced last month that Ankara is exploring three routes for facilitating increased gas from from Turkmenistan to Azerbaijan. Turkish officials have not yet explicitly stated the aim of the energy transfers being negotiated, but it is likely that parts of the agreements may see Turkey over see the transit of increased energy supplies from Turkmenistan to EU member states.

Oktay described negotiations as “a swap agreement” that will see natural gas transfers increased via a combination of “pipeline and ships” that already connect the two countries. Last year, Ankara and Ashgabat agreed on a deal that supplies 1.5-2.0 billion cubic meters of natural gas a year to gas to northeast Iran, and the same volume is then transited our of northwest Iran to Azerbaijan. The deal has allowed Azerbaijan to increase gas exports to Europe via Turkey, and Iranian officials have signalled an interest in transiting more gas to least as far as Azerbaijan.

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Progress in Talks Between Russia and Ukraine to Ease Blockade

Remarks made by Turkish officials indicate that Russia and Ukraine have agreed to a deal in principle that will allow for the export of blockaded grain from the Black Sea. Turkey made the announcement after talks were held in Istanbul with representatives from Turkey, the United Nations, Russia and Ukraine.

Ukraine and Russia are both vital exporters of wheat and grain, and together provide an estimated 30 percent of the global wheat and grain supply. Turkey's defence minister said the two sides agreed to form a coordination centre that will oversee joint controls vessels entering and leaving ports, with both Russia and Ukraine involved in ensuring navigational safety of shipping routes for commercial vessels. The details of the deal will be reviewed next week, with final agreement and successful implementation still far from certain.

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The US Continues to Defy China’s Claims in the South China Sea

China claims ownership over virtually the entire strategic waterway of the South China Sea. As Beijing considers these waters a part of China’s historic territory, Chinese officials object to any actions undertaken by the US military in the region. The recent passage of a US Navy destroyer close to China-controlled islands in the South China Sea, and China’s condemnation of the manoeuvres, is merely a continuation of two conflicting geopolitical visions.

An estimated $5 trillion in global trade traverse the South China Sea each year and the region holds highly valuable fish stocks and mineral resources. Along with China, the Philippines, Brunei, Malaysia, Vietnam, and Taiwan all lay competing claims to the region. In a bid to balance against China and deny it any consolidation of these claims, Washington supports the claims of the other regional governments claiming all or a part of the sea. Moreover, the US routinely projects military power in these waters as a way of reinforcing their own legal interpretation of the South China Sea as an international waterway subject to the norms of the UN Convention on the Law of the Sea.

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