In Geopolitics Today: Monday, August 15th
Nuclear Brinksmanship at Ukraine’s Zaporizhzhia Nuclear Power Plant, Colombia Presents Plans to Reduce Oil Dependency, and other stories.
Nuclear Brinksmanship at Ukraine’s Zaporizhzhia Nuclear Power Plant
In March, Russian troops seized the Zaporizhzhia nuclear power plant in southeast Ukraine after shelling the surrounding areas. Now, Russian forces appear to be strategically positioning long-range artillery near the power plant, complicating the ability of Ukraine’s armed forces to strike Russian military targets without causing a nuclear disaster at the power plant.
Russia and Ukraine remain engaged in a game of nuclear brinkmanship, accusing each other of carrying out strikes on the territory of the Zaporizhzhia nuclear power plant. Parts of the facility are now reportedly “seriously damaged” and one of its reactors has been shut down due to incoming artillery strikes. A meeting at the UN Security Council to resolve the crisis last week failed to do achieve consensus, and Russia has rejected a subsequent Security Council proposal for the demilitarization of the area. Two main threats derive from the situation at the power plant: one is of a disaster caused by a cooling failure; the other is the potential of an inaccurate artillery shell or missile causing an even worse calamity.
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China’s Waning Strategic Patience on Taiwan
To this day, the US position on “one China” remains : the United States recognizes the People’s Republic of China as the sole legal government of China but only acknowledges (not recognizes) the Chinese position that Taiwan is a part of China. This ambiguity in language has allowed the United States to disregard its stated adherence to the one China policy by assuming and supporting positions antithetical to Beijing’s sovereignty over Taipei.
Washington has over time distanced itself from the one China policy (while still adhering to the one China principle in name only), and has worked to increase Taiwan-US military cooperation. The US military almost doubled its troop presence in Taiwan in recent years, and has now set up a training ground on the island where Taiwanese forces are learning directly from US military officials. This has caused growing discomfort in Beijing, where an increased US military presence is likely to be viewed as a serious threat to national security. Advancements in interoperability — the capacity for Taiwanese and US forces to cooperate and conduct joint operations — are of particular concern to Beijing.
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Colombia Presents Plans to Reduce Oil Dependency
Crude oil is Colombia’s key legal export, generating $10.3 billion — or 36% of total export earnings — in the first half of 2022. Petroleum is responsible for around 3% of Colombia’s gross domestic product and a fifth of its government’s fiscal income. This means that Colombia’s oil industry is a key industry in its economy and major influence over the country’s political outcomes. This dependency has been identified as a key policy goal for the incoming administration led by Gustavo Petro.
In an effort to combat a steep fiscal deficit while boosting government revenues to fund ambitious social programs, Petro’s administration has introduced a tax reform bill. The proposals include increasing taxes for citizens earning over $2,400 per month, lifting dividend withholding tax for foreign investors owning shares in Colombian companies, and increasing taxes on extractive industries by implementing a 10% export tax on coal, gold and oil. Petro’s determination to reduce Colombia’s dependence on oil and facilitate a transition to sustainable energy promises to end widespread contracting for hydrocarbon exploration.
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Oil Markets Set for Increase in Both Supply and Demand
The International Energy Agency (IEA) has raised its estimates for global oil demand in its August Oil Market Report. The outlook for world oil supply has been revised upward as well, with limited declines of Russian oil supply to global markets forecasted.
Russia’s exports of crude and oil products to Europe, Japan, Korea and the United States have fallen by nearly 2.2 million barrels per day (bpd) since the start of the war in Ukraine. Nevertheless, the loss of these upstream flows has been offset by rerouted crude oil flows to India, China and Turkey, among others, and growth in Russian domestic demand. At the same time, electricity and natural gas prices have risen, and this has lead to increased incentives to switch from gas to oil for power generation in many countries unable to afford or source new gas deliveries.