In Geopolitics This Week
Iran and Russia Sign Railway Agreement to Complete Transport Corridor, China Strengthens Influence in Central Asia with Inaugural Summit, Japan Hosts G7 Summit in Hiroshima, and other stories.
Iran and Russia Sign Railway Agreement to Complete Transport Corridor
Iran and Russia have signed a railway agreement to develop the International North–South Transport Corridor. The $1.6 billion deal involves constructing a railway connecting Rasht and Astara in Iran, which will link existing sections of the corridor. The initiative aims to boost trade between Russia, Kazakhstan, Turkmenistan, Azerbaijan, Iran, and India by providing an alternative trade route to the Suez Canal.
The agreement marks a breakthrough in the long-stalled construction of the railway. Russia will invest €1.6 billion to fund the project's completion within 48 months, with the missing link of 162 kilometres between Rasht and Astara to be built collaboratively by Russian and Iranian companies. When completed, the North-South International Transport Corridor will connect Russia with the Caspian basin, the Persian Gulf, and other parts of Asia, promising to add significant value to global trade logistics by competing with existing routes such as the Suez Canal.
The signing ceremony was attended by Iranian and Russian officials, including Presidents Raisi and Putin. Raisi emphasized the route's potential for facilitating economic cooperation, while Putin highlighted its benefits in diversifying transportation routes away from the Suez Canal and reducing the delivery time and cost of bilateral trade. During his visit to Iran, Russian Deputy Prime Minister Novak also expressed optimism about the project's future and reached a number of agreements with Tehran on implementing a trade capacity of 15 million tons by 2030.
China Strengthens Influence in Central Asia with Inaugural Summit
Chinese President Xi Jinping recently held the inaugural China-Central Asia Summit, as part of efforts to increase Beijing’s influence in the region. The summit aimed to strengthen ties with the five Central Asian states by focusing on coordinating regional development strategies and boosting trade through infrastructure projects.
China's commitment to providing financial support and grants, totalling 26 billion yuan ($3.8 billion), underscores its dedication to strengthening economic ties with Central Asian countries. Trade between China and Central Asia reached a record high of $70 billion in 2022, demonstrating the growing economic integration between the two regions. Central Asian countries, seeking alternative trade and security partners, have expressed support for deeper engagement with China and participation in the Belt and Road Initiative. The summit provides President Xi with an opportunity to showcase China's global economic leadership and promote economic development and peace in the region.
The agreements signed during the summit highlight China's role as a key economic partner for Central Asia. At the same time, the war in Ukraine has created an opportunity for China to expand its security influence in the region as well. The agreements are therefore uncomfortable for Russia, as they contribute to the dilution of Moscow's once formidable influence in Central Asia. However, Russia likely also sees benefits to Chinese investment in promoting regional stability and economic growth. Russia recognizes that China's leading role aligns with its own vision of a world order that is not centred around the United States.
Japan Hosts G7 Summit in Hiroshima
This week, the Group of Seven (G7) leaders gathered in Hiroshima, Japan, to discuss various global issues, with a particular focus on economic security, supply chain resilience, and addressing non-market policies. Economic security has become a central theme of Japan's G7 presidency, as countries worldwide are advancing their own economic security agendas. The summit aims to foster collaboration among like-minded partners to tackle economic security threats, including China's assertiveness and the war in Ukraine.
Japan's G7 presidency highlights the significance of economic security as an essential dimension of national security. As global power dynamics shift towards the Indo-Pacific region, Japan aims to strengthen international collaboration and build support for a US-led coalition that works against China’s growing power. The G7 summit serves as a platform to advance a cooperative agenda on economic security between participants, focusing on aspects such as supply chain resilience, export controls, investment screening, and addressing non-market policies and economic coercion.
The G7 leaders released a communique addressing several key issues, including the climate crisis and international trade reforms. While the leaders acknowledge the urgency of the climate crisis and call on other countries to take action, there are concerns about the lack of sufficient domestic action by some G7 members. The communique also supports increased investment in clean energy supply chains and emphasizes the need to end new coal plant construction and phase out unabated fossil fuels. However, specific commitments and substantial capital injections into development banks necessary to accomplish these goals are lacking.
The broader representation at the G7, including Indo-Pacific partners and emerging economies, recognizes the changing global power dynamics. It also raises questions about the membership of current international institutions, which traditionally reflect the influence of 20th-century powers. The inclusion of countries like Australia, India, Indonesia, and Brazil aims to ensure that the joint declaration better represents the interests of the global community.