In Geopolitics Today: Monday, April 3rd
OPEC+ Announces Oil Production Cuts, Kurdistan Reaches Initial Oil Export Agreement with Baghdad, and other stories.
OPEC+ Announces Oil Production Cuts
OPEC+ oil producers have announced a surprise production cut of 1.16 million barrels per day (bpd) starting from May that will last until the end of 2023. The announcement came as a shock to the market and caused oil prices to jump. The production cuts are likely to create complications for the US Federal Reserve and other central banks that are easing off interest rate hikes due to the slowdown in inflation.
While the cuts were driven by oil market considerations, it could potentially strain the relationship between Saudi Arabia and the US, particularly as the production cut may be interpreted as benefiting Russia's oil export revenue, which Washington has sought to limit. OPEC+ countries are concerned about the slowing demand, especially with the collapse of the Silicon Valley Bank and UBS' acquisition of Credit Suisse.
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Kurdistan Reaches Initial Oil Export Agreement with Baghdad
After a ruling by the International Chamber of Commerce in favor of Iraq against Turkey on March 25th, Turkey shut down the pipeline that runs from the Kurdish Fish-Khabur border to the Turkish port of Ceyhan, cutting off crude oil exports from the Kurdistan Regional Government (KRG) in northern Iraq. However, officials from the KRG and federal government have now reached an initial agreement to restart exports, pending approval from both Turkey and the Iraqi Parliament.
While Baghdad and Erbil have been battling for years over the KRG’s unilateral crude oil exports, the situation intensified a year ago when the Iraqi Supreme Court ruled that a 2007 oil and gas law regulating the KRG’s industry was unconstitutional. However, since the election of a new Iraqi government in the fall, there had been indications that Baghdad was easing up on its legal battle with the KRG. Nevertheless, tensions remain high, and there are concerns that Turkey could pursue its own claims in the international court, which would delay Ankara’s approval.
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NATO’s Arctic Exercises Raise Concerns for Russia
The recent Arctic Forge 23 military exercise in Scandinavia has raised concerns for Russia. The joint exercise, which took place in Finland and Norway from February 16 to March 17, involved troops from 16 of NATO’s 30 member states and focused on building Arctic military capabilities and cooperation.
While the exercise was not insignificant, it was the flight of a US B-52H Stratofortress nuclear-armed strategic bomber over NATO members Estonia, Latvia, and Lithuania that caused the most concern for Russia. The exercise, along with other joint exercises under NATO’s auspices, occurred simultaneously, and saw Sweden and Finland, who have traditionally been neutral, depart from their historical policies to join NATO in carrying out these exercises. NATO's commitments in Scandinavia will expand beyond Norway and Denmark with Finnish membership. These exercises, along with the move towards a unified Nordic air force, remind the Russian government of NATO’s capabilities along an expanded Russia-NATO frontier.
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Overcoming Technical Challenges in Hydrogen Pipeline Transmission
Hydrogen infrastructure development is critical for achieving a net-zero carbon future. More than 4,300 km of hydrogen pipelines exist globally, with the majority located in Europe and North America. Spain, France, Germany, and the UK are among the countries committed to developing cross-border pipelines, with the European hydrogen backbone (EHB) initiative aiming for a total length of around 28,000 km in 2030 and 53,000 km by 2040.
However, there are a number of technical challenges associated with hydrogen pipeline transmission, including hydrogen embrittlement and permeation, which pose a substantial risk to existing natural gas pipelines. Coating, sleeves, and reinforced thermoplastic pipes are potential solutions to these challenges. While utilizing existing natural gas grids for hydrogen transport is more cost-effective than building new pipelines, these challenges must be overcome to ensure the safe and efficient transportation of hydrogen.
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India-Bhutan Relationship at Risk as Bhutan Shifts Stance on Doklam
The geopolitical situation in the South Asian region is highly complex, with India and China competing for influence and dominance. Bhutan, a small landlocked nation between India and China, has always been an important ally for India, helping India maintain its strategic interests in the region. However, the recent shift in Bhutan’s stance on Doklam may have far-reaching consequences for India and its relationship with Bhutan.
The India-Bhutan relationship has been an essential factor in maintaining peace and stability in the region. As a significant regional power, India has always supported Bhutan’s sovereignty and territorial integrity. India has also been a significant contributor to Bhutan’s socio-economic development, providing support to various sectors, including education, healthcare, and infrastructure. However, the recent shift in Bhutan’s stance on Doklam may give China an opportunity to expand its influence, which could be detrimental to India’s strategic interests. To avoid a scenario where Bhutan drifts closer to China, India must work to ensure that China does not undermine Bhutan’s sovereignty and territorial integrity, which is critical for India’s security.