In Geopolitics Today: Monday, February 5th
Suez Canal Revenues Plunge, Baltics Fortify Borders to Deter Russia, and other stories.
Suez Canal Revenues Plunge
Revenue for Egypt's crucial Suez Canal dropped nearly 50% in January 2023 compared to the same period last year, from $804 million down to $428 million. This steep decline is due to attacks launched by Houthi rebels on commercial ships passing through the Red Sea and Suez Canal in a show of support for Palestinians. The attacks have caused major shipping companies to avoid the canal and opt for the longer route around Africa's Cape of Good Hope instead.
The plunging Suez Canal incomes represent a major economic blow for Egypt, which derives significant foreign currency earnings and tax revenues from the global trade artery. With inflation already at record highs, the Egyptian pound recently hitting all-time lows, and the country seeking another IMF bailout, the shipping crisis comes at a perilous moment. For now, Egypt faces heavy regional pressure to curb the Houthis and protect the strategic waterway so vital to its economic health. But with attacks persisting despite Western strikes on Yemen, the crisis may drag on absent a Gaza ceasefire.
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Turkey and Egypt Reset Ties with Drone Deal
Turkish Foreign Minister Hakan Fidan declared on February 5th that Turkey has forged a significant agreement to supply unmanned aerial vehicles (UAVs) to Egypt, marking a pivotal development in the ongoing normalization of relations between the two nations. This diplomatic thaw follows a decade of strained ties, with Turkish President Erdoğan set to engage in talks with Egyptian leader El-Sisi in Cairo next week.
The recent drone deal not only highlights the increasing demand for Turkish UAVs, validated by their impact in various conflicts, but also signifies a deepening trust between the once adversarial nations. Strengthened economic and defence cooperation may enable greater coordination on regional stability, aligned investments, and managing competing interests in areas such as Gaza and Libya. An Ankara-Cairo axis could also serve as a strategic counterweight to Russian and Gulf influence over regional fault lines.
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South Korea and Saudi Arabia Align Defence Interests
South Korea and Saudi Arabia have formalized a memorandum of understanding to significantly expand bilateral defence industry collaboration. The pact, established by respective defence ministers during a major arms exhibition in Riyadh, sets the stage for a joint committee to cooperate on weapons research, development, and production.
This defence agreement represents a deepening of economic ties and military technology transfer, addressing national security priorities for both Riyadh and Seoul. South Korea aims to leverage its sophisticated and cost-competitive defence technologies to become a top global military exporter, while Saudi Arabia seeks to achieve self-sufficiency and diversify suppliers beyond traditional Western partners. The collaboration aligns mutual interests in transferring knowledge and technology, offering significant upside for both partners.
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Power Plant Blast Adds to Kyrgyzstan's Winter Energy Woes
An explosion at Kyrgyzstan's largest Bishkek Thermal Power Plant (TETs) in the early hours of February 2nd cut off hot water for nearly all households in the capital Bishkek. The incident also left parts of the city without any heating, as the plant provides around 15% of the country's electricity. Investigations point to safety violations and technical malpractice rather than sabotage.
The loss of the Bishkek TETs has severely disrupted essential utilities for Kyrgyz residents amid winter cold. President Japarov has taken direct control and seeks urgent upgrades, recalling previous failed renovations. Additionally, natural gas shortages in Osh city highlight Kyrgyzstan's reliance on imported Uzbek supply. With infrastructure challenges compounding wider economic and political uncertainty, authorities face immense pressure to quickly restore heating. However, modernizing energy security and winter supply resilience demands actions if living standards hope to progress.
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Baltics Fortify Borders to Deter Russia
On January 19th, 2024, the Baltic States of Estonia, Latvia, and Lithuania jointly announced their intention to construct reinforced defensive fortifications and bunkers along their land borders with Russia and Belarus. While details are still limited, Estonia outlined plans for 600 bunkers and supporting infrastructure beginning in 2025.
The ambitious Baltic defensive line project poses logistical challenges, requiring considerable resources and preparation across over 2,000 kilometres of terrain. The shift aims to deny territory to Russia, presenting a formidable capability and resolve for deterrence. The success of this strategic shift hinges on optimal placement of mutually-supporting bunkers and sustaining rotating defenders. The project marks a shift away from traditional NATO manoeuvre warfare doctrine, prioritizing mobility and elasticity. Instead, it adopts a more static defence posture. Deterrence will ultimately depend on presenting formidable capability and resolve.
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Red Sea Rivalries Threaten Global Trade
The Red Sea has become a microcosm of overlapping regional rivalries and proxy conflicts that threaten a critical global shipping route. Deep tensions persist between Gulf states, Horn of Africa countries, and external powers like the Western powers, Turkey, Russia, and China. This complex web of competing interests, military posturing and opportunistic alliances provides fertile ground for further escalations that could strangle trade.
With no dominant regional mediator able to de-escalate tensions, great power cooperation between the US and China may be the only way to secure the waterways. Though fraught bilateral relations complicate partnerships, their shared interests in protecting freedom of navigation present an opportunity. Additionally, the EU is in a position to promote accommodation between the two powers as a model for global order management. While the Red Sea remains a tinderbox, preventing its weaponization against global trade is a difficult task that will require transcending zero-sum mentalities and finding common ground.