In Geopolitics Today: Friday, February 10th
Japan and the Philippines Agree to Deepen Defence Ties, Sanctions Take Toll on Russian Oil Production and Revenues, and other stories.
Japan and the Philippines Agree to Deepen Defence Ties
A defence arrangement has been signed by the leaders of Japan and the Philippines, allowing for greater access of Japanese troops to Philippine territory and the deployment of troops. The agreement is a step towards broader military cooperation and may lead to similar agreements with other Southeast Asian nations.
The two leaders also resolved to increase their defence capabilities and strengthen overall security cooperation, with the transfer of more defence equipment and technology. They expressed serious concerns about the situation in the East and China Seas and opposition to actions that may increase tensions. The two countries also agreed to strengthen cyber and economic security, with Japan providing economic assistance to the Philippines and working together in information and communication technology and energy security and industrial development.
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Pakistan Set to Receive Conditional Loan from the IMF
Pakistan and the International Monetary Fund (IMF) have agreed on the conditions to release $1.1bn in financial aid to help the country avoid an economic collapse after the payment was delayed. Pakistan signed a $6bn bailout package with the IMF in 2019 and an additional $1bn was added a year later.
The government will now look to implement fiscal measures demanded by the IMF, including raising $627m through new taxes and increasing fuel taxes, with diesel levies to be doubled to 5 rupees per litre in March and April. Pakistan is currently facing an economic meltdown, with a balance of payment crisis, record inflation, and a plummeting rupee. The country's foreign exchange reserves fell to $2.9bn last week. The next week is considered critical for the country as decisions need to be made quickly.
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India Balances Ties with West, Global South Amid Growing Challenges
India is seeking to strengthen its ties with both the West (G-7 countries) and the Global South. The West is important to India as a major trading partner, a source of capital and technology, a key destination for the Indian diaspora, and also as a means to deal with increasing challenges from China.
The West has an interest in a stronger India to counter the growing influence of China. As such, integrating India into the G-7 process is the logical next step for the West, as the G-7 has increasingly taken on the character of a political bloc. India's reengagement with the global south is more about reconnecting with a global constituency and is driven primarily by India's growing economic ambitions. Geopolitically, India is concerned about China's assertiveness and sees an opportunity to offer stiffer competition to China if it partners more closely with the West.
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Thailand’s Military Spending Sparks Public Concerns
The Thai economy in 2022 performed better than expected, with 11.81 million international tourists visiting the country and strong domestic demand for electric vehicles. The Thai public has expressed concerns about wasteful spending, safety protocols, and the lack of transparency in the military.
Exports exceeded the Commerce Ministry's target by 1.5 percent and reached a record high of $287 billion. Imports, however, grew by 13.6 percent to $303 billion, leading to a trade deficit of $16.1 billion, mainly due to an increase in the import of natural gas and defence goods. The Thai military is seeking to modernize its defence capabilities and has acquired new weapons from the US and Israel, as well as making progress in a stalled submarine deal with China. The Royal Thai Navy has also secured approval for a new frigate project to be built domestically.
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Sanctions Take Toll on Russian Oil Production and Revenues
Russia is facing a risk of lower oil production this year due to the EU import bans and price caps on Russian crude and petroleum products. Despite the sanctions and expectations of a drop in supply, Russia's oil production and exports had been holding up until recently, with production levels of 9.8-9.9 million barrels per day in January 2023.
However, low prices of the Urals blend have led to a decline in Russia’s budget revenues and a budget surplus in January 2023. Russia is considering taxing its oil firms based on the price of Brent, instead of Urals, to limit the impact on budget revenues. The impact of sanctions, embargoes, and price caps are finally leading to a decline in Russian production.