In Geopolitics This Week
Indonesia’s Coal Export Ban Upsets Asian Markets, Russia’s Economic Diversity and Defence Spending, A Week of US-Russia Talks on European Security, and other stories.
Indonesia’s Coal Export Ban Upsets Asian Markets
Indonesia’s government announced at the start of this year that the country was banning coal exports for the entire month of January. The decision was made amid a rising risk of widespread blackouts and power shortages caused by critically low supplies of coal at domestic power plants. But just days after the ban came into effect, countries in the region that rely on coal from Indonesia made statements calling for an end to the ban.
When Indonesia imposed the ban, officials said that the state-owned Perusahaan Listrik Negara (PLN) faced critically low stockpiles which threatened power supplies to the islands of Java and Bali. The Indonesian government complained that this was due to the fact that local coal miners have not met their domestic market obligations, under which they must supply 25% of their production domestically. Japan, South Korea and the Philippines all heavily rely on Indonesian coal, making the lack of available supplies — as well as a potential rise in the price of coal — a matter of serious concern.
Following international pressure from those heavily dependent on coal imports arriving from Indonesia, officials in Jakarta chose to enact a partial relaxation of the ban. The Coordinating Ministry of Maritime Affairs and Investment announced that the country has now allowed over 37 vessels loaded with coal to be sent to other ports. The ministry said that due to a rise in domestic coal stocks, the ships that have already been loaded will be released for export, though officials failed to specify whether or not other such moves would take place in the coming days. A continued ban on coal exports from the world’s largest exporter of the commodity may push global coal prices higher in the coming weeks.
Russia’s Economic Diversity and Defence Spending
Russia has often been described as a petrostate, a country which derives its wealth almost entirely from its energy exports. As US President Joe Biden remarked last year, Russia possesses an economy that has “nuclear weapons and oil wells and nothing else.” But this is an inaccurate assessment of the country’s economic capacity, one which often clouds our understanding of Russia’s economic power, and in turn, Russian capabilities. As a matter of fact, sales derived from oil and gas made up just over 15% of Russia’s GDP last year.
While hydrocarbons still play a dominant role in Moscow’s federal budget, Russia’s economy today has become multifaceted. Russia is engaged in numerous civilian nuclear reactor transfers globally and is the second largest exporter of conventional weapons in the world. The country also generates revenue by providing services in the space sector and by selling billions of dollars’ worth of metals every year. Russia is also both the top producer and the top exporter of wheat, is a major coal exporter and the country harnesses a domestic services sector that plays a major role in its economy. With the capacity to produce domestic appliances, vehicles, civilian aircraft, agricultural machinery and more, Russian businesses are able to produce goods and services that can fulfil the needs of the population.
In a similar vein to the misconceptions associated with Russia’s economic diversity, assessments of Russian defence spending also commonly fail to accurately represent the country’s defence budget. While Russia should still be considered a diminishing power, the country nonetheless ranks high when compared to other major world powers. Often measured in nominal terms, a more accurate analysis to accounts for a country’s defence spending utilizing a Purchasing Power Parity (PPP) method, which takes into account the relative cost of goods, services and inflation rates locally. Applying the PPP method to defence spending, Russia’s annual military expenditures account for roughly $170 billion, the 5th highest in the world behind India and Saudi Arabia.
A Week of US-Russia Talks on European Security
Russia held a series of meetings with the United States, NATO and the Organization for Security and Cooperation in Europe (OSCE) group this week over issues pertaining to European security. The week of diplomatic negotiations is taking place amidst a build-up of forces on the border between Russia and Ukraine, and discussions began when the US delegation led by Deputy Secretary of State Wendy Sherman met with the Russian delegation led by Deputy Foreign Minister Sergei Ryabkov in Geneva on Monday.
The two sides met to discuss Moscow's demands for a revised framework for European security. Yet public statements made by US and Russian officials leading up to the meetings, as well as throughout this week of talks, revealed starkly different narratives. The difference in terminology in their respective aims reflect fundamentally different missions. From Russia’s point of view, the negotiations are about security guarantees via a withdrawal of NATO troops and military equipment from Ukraine and a binding agreement on stopping future NATO expansion. On the other hand, the US and its allies reject Russia’s proposals for any legally binding commitments to halt NATO expansion, and NATO allies frame the discussions as an effort to de-militarize the Ukrainian border instead.
After talks had concluded for the week, public statements indicated little or no progress. The different approaches to the talks taken by each side will likely mean reaching any grand compromise on European security can be ruled out in this instance. Though behind the scenes, Washington may be willing to compromise on some points given the country’s focus on China and the Indo-Pacific. For this reason, a land-based conflict in Europe — especially with a military power such as Russia — is inconvenient at this time. In this regard, talks with Russia may help Washington probe for a way to drive a wedge between Russia and China. Nevertheless, the US and its allies have put up a united front toward the issue thus far, and may choose to risk facing further escalation by outright rejecting Moscow’s security demands going forward.