In Geopolitics This Week
European Security Talks Continue as More Weapons are Deployed, Iran’s Increased Engagement with China & Russia, Oil Prices Surge Amid Disruptions & Uncertainties, and other stories.
European Security Talks Continue as More Weapons are Deployed
The United States and Russia have held more talks this week aimed at alleviating the tense standoff over Ukraine, but so far all indications point to very little progress toward a peaceful resolution. American and Russian officials have described this latest round of talks as frank, and both sides agreed to keep diplomatic channels open as their standoff continues. This week saw an increase in armaments on the border between Russia and Ukraine, with Moscow deploying additional troops and armoured units while Ukraine received multiple arms shipments and additional troops from Canada, the United Kingdom and the United States.
Washington continues to warn Moscow of the consequences of a speculated invasion, while Moscow seeks concrete legal assurances on security. At the same time, military activity across the whole Russian border is increasing. Early-warning aircraft and RQ-4 surveillance drones regularly gather intelligence across Russia’s border, and Ukraine’s partners are working to further bolster the capabilities of the Ukrainian armed forces. The UK has sent more than 2000 anti-tank systems together with a detachment of 30 troops, Canada has dispatched a unit of its Canadian Special Operations Forces, and the United States has both given a green light to its allies Estonia, Latvia and Lithuania to transfer US-made Javelin and Stinger missile systems to Ukraine, as well as delivered a separate $200 million military support package.
There has been a considerable build-up of arms on the Russian side as well this week. In the midst of negotiations, Russian Deputy Defense Minister Alexander Fomin spoke to dozens of foreign diplomats stationed in Moscow as he announced joint military drills with Belarus, to be held near the Ukranian border. Numerous reports throughout the week also indicated that Russia is transporting large amounts of armoured vehicles from the country’s East. Satellite images suggest a further build-up of troops and arms near Voronezh, and ground footage showed instances of military hardware on the move in Oryol, with another batch of armoured units also spotted in Smolensk.
Iran’s Increased Engagement with China & Russia
Recent years have witnessed intensified opposition to the global pre-eminence of the United States by Russia and China. In their own ways, and as each act in pursuit of their own respective interests, both Moscow and Beijing have shown a willingness to establish informal ties with the Islamic Republic of Iran much to the chagrin of policymakers in the US and Israel. Iran’s new political leadership has declared that the world has “entered a new era,” one in which US hegemony and unilateralism are “failing” endeavours, and in which power is redistributed “to the benefit of independent countries.”
For Iran however, a country facing crushing sanctions and military pressure from Israel, one way out these pressures is by cultvating economic ties with China and Russia as a means to economic development and regime survival. With Israel normalizing ties across the Middle East, and with the interests of the Arab states of the Persian Gulf and Iran increasingly opposed over Yemen, Tehran has few options for engagement with countries in the Middle East. Iran also believes Asian powers are growing in relative power compared to Washington, and that this trend presents an opportunity to escape its current econonomic containment by cooperating with partners to the East as a means of furthering the country’s goals.
Iran’s acceptance into the Shanghai Cooperation Organization (SCO) is a central part of the country’s goal to escape the punishing effects of these US sanctions. While joining could take up to two years to finalize, Iran’s government has already hailed the proceedings as a major victory to domestic audiences. By joining, Tehran would enhance its cooperative relationships with China and Russia, as well as other SCO member states. Ties have the potential for significant military cooperation too, and the three countries recently conducted another joint naval drill in the northern Indian Ocean. Further integration with Asian markets would also diminish the power of US sanctions on Iran, and enable for domestic economic growth to take root.
Oil Prices Surge Amid Disruptions and Uncertainties
Oil prices are approaching $90 per barrel at a time of increased geopolitical uncertainty. Prices have continued their early-year surge in the new year, thanks in part due to tight oil and gas supplies amid growing supply disruptions. Once powerful players in global energy markets, Latin American oil companies today are struggling. The energy markets have reacted to the increased risk associated with supply shortages and to recent geopolitical headwinds with a significant premium on both oil and gas products.
Brazil’s state-run oil company has raised the price of gasoline and diesel, a move that is designed to avoid shortages but will mean Brazilian motorists will pay more at the pump. In Venezuela, for the first time in a century, there are no more rigs searching for oil reserves. While the country is reportedly ready to resume exports of diluted crude for the first time in months, it still faces problems as its pipeline network is under constant attack, with another pipeline explosion taking place last week. Mexico’s government has been moving ahead with a revamp of the country’s energy sector in an attempt to get the state-owned energy giant Pemex back on its feet. The government has reportedly cut Pemex’s debt by $3.2 billion, but the company remains buried under a further $113 billion of debt, the most of any state-operated oil company in the world.
But aside from any sporadic disruptions to the supply of oil, the OPEC group of oil-producing nations does not expect a drastic change in the overall global demand of oil in the coming months. According to their latest report on global energy markets, they see demand in the first quarter of 2022 unchanged from previous estimates at 4.2 million barrels per day. OPEC also estimates that average global oil consumption is set to reach 100.8 million barrels per day, exceeding levels seen before the COVID-19 pandemic. OPEC also finds that the current global economic momentum will continue, and that oil markets are expected to “remain well-supported throughout 2022.” Increased risk and uncertainty is nevertheless bound to translate to an increase in energy prices, which means a tumultuous year in geopolitics could drive the price of oil even higher.