In Geopolitics Today: Friday, December 22nd
US Unleashes Secondary Russia Sanctions, UN Security Council Adopts Resolution on Gaza, and other stories.
US Unleashes Secondary Russia Sanctions
US President Joe Biden has signed an executive order opening the door for secondary sanctions on any financial institution, domestic or foreign, that enables Russia to circumvent restrictions and procure critical wartime equipment. While most major Western banks have extricated exposures in Russia, the measures threaten repercussions for smaller regional banks and even unknowing intermediaries processing transactions with sanctioned entities.
The executive order represents a significant escalation, expanding the US government's authority to directly target sanctions evasion and choke points in Russia's supply chains. Enabling penalties against both witting and unwitting accomplices will compel overcompliance across the international financial system. Even compliant banks may preemptively cut ties with any corporation maintaining Russian operations to avoid potential violations. Washington is deploying American financial supremacy in unprecedented ways with unpredictable consequences. While aiming to degrade Russia's military, weaponizing interconnectedness risks hardened divisions, accelerating the emergence of parallel financial ecosystems.
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China Revokes Trade Benefits for Taiwan
China has revoked preferential tax rates on imports of key Taiwanese chemical products, including vinyl chloride and propylene. The move is grounded in claims that Taiwan violated a 2010 cross-strait trade deal by blocking imports of over 2,500 categories of Chinese goods. The tax hike on 12 petrochemicals takes effect January 1st, although the economic impact is expected to be minor.
Taiwan condemned the tariff increase as a form of election interference, occurring just before January 13th parliamentary and presidential elections. While largely symbolic amid a much broader trade surplus that favours China, the taxes could politically benefit the ruling pro-sovereignty party by highlighting economic coercion from Beijing. But outcomes remain uncertain in a close contest between candidates over Taiwan's sensitive relationship with China.
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UN Security Council Adopts Resolution on Gaza
The UN Security Council has adopted a watered-down resolution calling for expanded humanitarian assistance to Gaza after countless delays and tense negotiations. The text stops short of demanding a ceasefire or binding mechanisms, instead requesting the UN chief appoint an official to oversee aid delivery. It passed with 13 votes in favour and two abstentions from the United States and Russia.
While the resolution underscores unanimous Security Council recognition of the dire humanitarian situation in Gaza, its negotiated language lacks teeth. By merely calling to “create conditions” for a cessation of hostilities rather than directly demanding a ceasefire, it leaves substantial room for interpretation and continued Israeli military manoeuvres on the ground. The text avoids concrete mechanisms or accountability tools that could enable more effective aid delivery. Devoid of enforceable ceasefire requirements, the practical impact may remain limited. Without a definitive halt to violence guaranteeing safe passage, it is unclear if the resolution can achieve conditions for scaled up, sustainable relief efforts.
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Argentina Pursues New Foreign Policy Direction
President Javier Milei has outlined a new foreign policy direction for Argentina, one centred on strengthening ties with market democracies and promoting free trade. This marks a shift from Argentina's previous focus on South-South cooperation and regional organizations. Milei aims to bolster economic growth through increased exports and trade liberalization. His administration has prioritized outreach to the United States, with early high-level engagements.
Specific policy plans include professionalizing Argentina's foreign service, renegotiating the terms of Mercosur, and participating actively in the G20. Domestically, Milei faces major challenges to fulfil promises on privatization and poverty alleviation with a fragmented political landscape. Milei's alignment with the US and liberal democracies risks economic blowback if it results in sanctions or lost business partnerships that negatively impact Chinese investors and technology firms. Balancing domestic reforms with shifting international alliances, mitigating potential retaliation from US adversaries like China, and shaping regional ties amid changing geopolitical dynamics will be key foreign policy tests.
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Japan Overhauls Arms Export Ban to Refill US Missile Stockpiles
Japan has informally decided to export domestically manufactured Patriot interceptor missiles to the United States, marking the first time since 2014 Japan will export completed weapons systems overseas. The decision signals a major shift in Japan's strict defence equipment transfer policies enacted after WWII.
By exporting PAC-2 and PAC-3 missile system, Japan aims to indirectly aid Ukraine while still adhering to its ban on exports directly to conflict zones. The export decision is a part of Japan's efforts to prioritize its alliance with the US as it pursues a defence build-up amid rising regional threats. While unable to directly export weapons to Ukraine under its current policies, Japan's move will allow the US to redirect its own systems to Ukraine. However, Japan still faces constitutional limitations that constrain its direct military support globally even as its security posture grows more assertive.
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Armenia Renews Nuclear Ties with Russia
On December 15th, Armenia and Russia signed a $65 million contract to modernize and extend operations of Armenia's Metsamor Nuclear Power Plant until 2036. Metsamor, located west of Yerevan, is Armenia's only nuclear plant and generates 31% of the country's electricity on average. Under the deal with Russia's state nuclear company Rosatom, ageing infrastructure at Metsamor's one operational reactor will be upgraded, so operations can continue for another 14 years before its scheduled decommissioning.
The deal highlights Armenia's persistent and overwhelming dependence on Russia for energy, despite recent efforts to diversify ties. With Russian gas accounting for 87.5% of imports and uranium from Russia fuelling Metsamor, Armenia relies heavily on Russia to meet its electricity demands even as it explores alternative nuclear partnerships. Given Russian control of regional gas pipelines, the scope for Armenia to meaningfully diversify energy links in the near future appears limited. The deal therefore serves as another reminder of Yerevan's deeply intertwined infrastructure and economic reliance on Moscow, constraining Armenia's room for political manoeuvre at a time when Brussels and Washington work to reduce these economic links.