In Geopolitics Today: Friday, September 15th
US Sanctions Turkish Companies for Russia Sanctions Evasion, Armenia-Azerbaijan Tensions Escalate Amidst Failed Diplomacy, and other stories.
US Sanctions Turkish Companies for Russia Sanctions Evasion
The United States has imposed sanctions on several Turkish companies for their alleged involvement in assisting Russia in evading sanctions. The sanctions specifically target shipping and trade firms accused of aiding sanctioned Russian defence entities and transferring dual-use goods.
These sanctions underscore the increasing pressure from the US on Turkey concerning its relations with Russia, particularly in the context of the war in Ukraine. Although not directly targeting the Turkish government, these measures carry the risk of exacerbating tensions in the fragile US-Turkey relationship. Turkey, as a matter of principle, rejects sanctions but maintains that it is not facilitating Russian sanctions evasion. Effectively managing these sanctions to prevent any disruption to NATO expansion plans will require adept diplomatic efforts, particularly in the midst of an ongoing war.
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RTX Ends Agreement with Saudi Weapons Company Scopa
US defence corporation RTX, formerly known as Raytheon Technologies, has terminated a significant agreement with Saudi weapons manufacturer Scopa due to Scopa's “interactions” with sanctioned Russian and Chinese entities. Reports suggest that Scopa actively pursued business dealings with entities under US sanctions and exchanged data with affiliated firms involved in similar transactions. These actions have raised concerns in Washington as the United States seeks to isolate Russia and China.
The termination of this deal is a glimpse into the complex balancing act Saudi Arabia must navigate. On one hand, it seeks to maintain its deep security relationships with the US, while on the other, it aims to strengthen ties with nations considered adversaries by the US, such as China and Russia. As Saudi Arabia forges economic partnerships with China and refrains from distancing itself from Russia amid the Ukraine crisis, it faces constraints in its defence collaborations with Washington. These intricate alignments highlight the emergence of new fault lines in the Middle East, where major global powers vie for influence in a multifaceted geopolitical landscape.
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China's Economic Strategy Shifts Towards Microeconomic Reforms
In recent decades, China's extraordinary economic ascent has been characterized by consistent annual growth rates averaging nearly 10%, a testament to the adaptability and effectiveness of Chinese policymakers within the framework of their state-capitalist economic system. This system allowed for swift and assertive interventions in the face of economic challenges, ensuring both financial stability and sustained economic growth. However, a notable shift in strategy is now underway. Rather than pursuing an aggressive approach to reignite economic growth, the Chinese government is primarily focused on microeconomic reforms.
This strategic shift is part of a broader effort to address the issue of overinvestment in unproductive sectors, a problem rooted in China's high savings rates, currently accounting for 45% of GDP. The overinvestment, particularly in real estate and infrastructure projects, has created financial risks and hindered sustainable economic growth. Failure to address these challenges could lead to a significant economic crisis with far-reaching implications for both China and its global trade partners. In this complex landscape, the Chinese government faces the delicate task of balancing the need for economic rebalancing with the imperative to avoid a severe economic slowdown and financial losses. This entails deploying a range of policy instruments, including expansionary fiscal measures and structural reforms, to stimulate domestic demand, reduce savings, and create new avenues for productive investments.
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UK, France, and Germany Extend Iran Sanctions
Britain, France, and Germany have stated they will extend sanctions on Iran related to its nuclear program and ballistic missile development. These sanctions, initially set to expire in October under the 2015 Iran nuclear deal, are being extended due to Iran's “consistent noncompliance” with the accord.
The sanctions encompass restrictions on Iran's development of ballistic missiles capable of carrying nuclear warheads and the transfer of drones and missiles to and from Iran. They also involve asset freezes targeting specific Iranian individuals and entities linked to the nuclear and ballistic missile programs. The decision to uphold the agreement while Iran continues to defy its commitments adds complexity to the diplomatic efforts to revive the JCPOA, which remains in a precarious state. The situation also comes amid delicate negotiations between the US and Iran regarding a prisoner swap and the release of Iranian assets held in South Korean banks.
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Armenia-Azerbaijan Tensions Escalate Amidst Failed Diplomacy
Armenian Prime Minister Nikol Pashinyan's recent call for immediate talks with Azerbaijani President Ilham Aliyev without preconditions underscore the escalating tensions between Armenia and Azerbaijan. Both sides have accused each other of military build-ups along their shared border, raising concerns of another military conflict. These tensions come as diplomatic efforts have failed to resolve key issues, including the reopening of strategic roads and humanitarian aid delivery to the Armenian community in the disputed Karabakh region.
The inability to find common ground on critical issues such as the opening of key roads and the delivery of humanitarian aid deepens the uncertainty surrounding Armenian-Azerbaijani relations. With both sides becoming increasingly confrontational in their statements and actions, the spectre of renewed violence looms large. Additionally, strained relations between Russia and Armenia, coupled with Iran's threats over the Zangezur Corridor, raise the possibility of a wider regional conflict. The situation remains volatile, and the risk of another war in the South Caucasus cannot be dismissed.
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Reassessing Economic Interdependence as a National Security Threat
Economic interdependence among major powers now appears to constitute a dire national security threat. Global supply chains, energy infrastructure links, and financial networks are increasingly seen as vectors for economic coercion and vulnerability. However, upon examination, evidence suggests these fears have been significantly overblown. Interdependence has not magically induced revisionist powers to become benign, but neither has it caused the systemic breakdown and cascading disasters that some predicted.
The greater danger is that the growing narrative of securitizing interdependence becomes a self-fulfilling prophecy. Taking extensive steps to reduce economic dependencies could perversely raise geopolitical tensions and conflict risks over the long-term by removing constraints on state actions. There is no doubt the benefits of modern globalization were oversold by some apostles. Yet patterns of trade, investment, and development still likely discourage outright great power war far more than they enable coercion. As major powers navigate a more contested world, finding the right balance between security and interdependence will remain a crucial challenge.