In Geopolitics This Week
The European Commission Announces Net-Zero Industry Act, Normalization of Ties with Saudi Arabia a Priority for Israel, Peru Remains Embroiled in a Severe Political Crisis, and other stories.
The European Commission Announces Net-Zero Industry Act
The European Commission has announced a plan to boost subsidies and tax breaks for clean-tech companies in response to growing competition from the United States and China. The Commission is proposing a new 'Net-Zero Industry Act' that lays out a series of clean technology goals for 2030. The clean technology goals would necessitate faster permit processes and increased subsidies for green projects.
The EU is directly responding to the Inflation Reduction Act (IRA) passed in the US, which directs about $369 billion toward clean energy and energy-security programs. The IRA is the largest single package of spending on low-carbon technologies and activities by any national government, and promises to favour those businesses which operate from within the United States. Brussels fears (with good reason) that the IRA will drive investment away from Europe's industrial sector.
The EU has raised concerns about whether the IRA will hinder its ability to sell technologies internationally and whether US-made imports will undercut EU-made technologies going forward. The European Commission’s announced response involves consultations with EU member states over how to revise aid rules in order to enable the bloc’s member states to better support their industries against increased global competition.
A negotiated solution is also being discussed over concerns about discrimination caused by the IRA, according to EU Trade Commissioner Valdis Dombrovskis. He has stated that the EU's ongoing negotiations with US officials have only allayed some of their concerns so far and that a number of discriminatory measures in the IRA still need to be addressed. Dombrovkis also emphasized that Brussels must remain “realistic” about the likelihood that the EU can convince the US to change its policy to more closely align with EU interests.
Normalization of Ties with Saudi Arabia a Priority for Israel
The new Israeli Prime Minister Benjamin Netanyahu has suggested that Israel’s normalization of ties with the Kingdom of Saudi Arabia will be one of the main foreign policy goals of his administration. The prime minister’s office released a statement which said that deepening the Abraham Accords “with emphasis on a breakthrough regarding Saudi Arabia” was on the agenda during a recent meeting between Netanyahu and US National Security Advisor Jake Sullivan.
Saudi Arabia has long maintained public support for Palestinian statehood, even as relations between the kingdom and Israel have warmed behind closed doors. Despite the lack of official diplomatic relations between the countries, a secret meeting between the crown prince of Saudi Arabia and the Prime Minister of Israel was reported to have occurred in 2020. Last year, Saudi Crown Prince Mohammad bin Salman openly stated that Saudi Arabia does not view Israel as an enemy, but instead as a “potential ally” that exhibits certain “common interests” that both countries can “pursue together.” At the time, the Saudi Crown Prince maintained that “some issues must be resolved” before this process can take shape.
Now, as the recent meeting between US and Israeli officials once again stirs rumours of normalization, Saudi Arabia’s Foreign Minister Faisal bin Farhan Al-Saud has made clear that his country will not normalize relations with Israel until Palestinians are granted statehood. Saudi Arabia has thus refrained from engaging in serious talks with Israel, putting the Palestinian issue as a conditional step for any normalization agreement.
However, most members of Israel’s new hard-line government are likely to oppose the creation of a Palestinian state. Israel’s main ally and military backer, the United States, has traditionally been the primary broker of the Israeli-Palestinian peace process, but the Biden administration has not made mention of relaunching talks. Instead, the US and Israel have focused their efforts on strengthening the Abraham Accords, under which Israel has normalized ties with four Arab states: Bahrain, Morocco, Sudan and the United Arab Emirates. All signs point to continuity in this process, effectively side-lining the issue of Palestinian statehood in the process.
Peru Remains Embroiled in a Severe Political Crisis
Political instability continues to fuel unrest in Peru, impeding the government's ability to address longer-term issues such as food instability and rural poverty. This has been demonstrated over the past month and a half, as Peruvians have taken to the streets en masse demanding early elections and the release of the country's former leftist president Pedro Castillo, paralyzing government institutions in the process.
The ongoing protests have blocked off major roads, causing supply chain disruptions. Clashes between protesters and security forces have already resulted in the deaths of over 50 civilians, with many more arrested. The new president, Dina Boluarte, has struggled to navigate this difficult political environment and has sought to implement a strong security response to the unrest, resulting in growing calls for her resignation from across the country.
The protests are being fuelled by the population’s frustration with the impeachment and imprisonment of the popular former President Pedro Castillo. More broadly, however, the protests have been exacerbated by long growing nationwide dissatisfaction at ruling elites caused by a worsening urban-rural divide, leaving large swathes of the population disillusioned with their government.
Over the past five years, Peru has had six presidents and three Congresses, largely due to the country's constitutional articles that allow the executive and legislative branches to oust each other from office. These constant changes of power in Lima have severely weakened Peru's governing institutions and its government's ability to respond to emerging crises. As a result, the country is likely to continue to experience political instability, recurrent protests and slowed economic growth unless meaningful constitutional reform can be made.