In Geopolitics Today: Monday, July 10th
Conflicting Claims Over the Durra Gas Field, Foxconn Withdraws from Semiconductor Venture in India, and other stories.
Conflicting Claims Over the Durra Gas Field
Saudi Arabia and Kuwait have once again asserted their joint ownership of the Al-Durra gas field. The dispute over this lucrative site has been ongoing for years, and recent developments have further complicated the situation. The Saudi and Kuwaiti authorities have called on Iran to engage in negotiations to demarcate the eastern border of the area, emphasizing that the natural resources in the “Divided Area” are solely owned by Saudi Arabia and Kuwait. However, Iran has persistently asserted its own claims in the area and announced plans to commence drilling in the Al-Durra gas field.
The conflicting claims over the Al-Durra gas field hold significant implications for the region. The field, one of the world's largest, possesses substantial natural gas reserves and plays a vital role in the gas production of Saudi Arabia and Kuwait. The competing interpretations of maritime boundaries and Iran's persistence in pursuing energy exploration activities in the area pose challenges to reaching a resolution. The ongoing tensions underscore the need for diplomatic negotiations or alternative means to find a mutually agreeable solution. The resolution of the Durra gas field dispute will not only impact the involved parties, but also have wider ramifications for stability and cooperation in the Gulf region.
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Argentina Inaugurates Gas Pipeline in Pursuit of Energy Independence
Argentina has marked a significant milestone in its pursuit of energy independence by inaugurating the first leg of the Néstor Kirchner gas pipeline. President Alberto Fernández officially launched the pipeline, which stretches from the Vaca Muerta shale gas fields to the Buenos Aires province, with plans for an extension to the town of San Jeronimo in the province of Santa Fe. The Vaca Muerta shale play is estimated to hold the world's second-largest shale gas deposit, with recoverable resources totalling 16 billion barrels of oil and 308 trillion cubic feet of natural gas.
The completion of the Néstor Kirchner gas pipeline is a significant infrastructure project for Argentina, aimed at achieving energy self-sufficiency and reducing the country's dependence on expensive liquefied natural gas (LNG) imports. The pipeline will provide a steady supply of natural gas for industrial and household use, offering competitive prices and resulting in annual savings of $4.2 billion in gas import bills. Argentina's efforts to tap into its vast hydrocarbon potential has faced challenges, including economic crises, global oil and gas market fluctuations, and foreign exchange limitations. The development of Vaca Muerta is crucial for Argentina's economic revival, particularly as the country grapples with sovereign debt issues and strives for a more stable energy sector.
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China and Solomon Islands Establish Strategic Partnership
China and the Solomon Islands have officially established a comprehensive strategic partnership, signifying a significant development in their bilateral relations. During Prime Minister Sogavare's visit to Beijing, Chinese President Xi Jinping and Sogavare announced the partnership, marking four years since the Solomon Islands switched diplomatic recognition from Taiwan to China.
President Xi emphasized the importance of mutual assistance and cooperation within the framework of South-South cooperation, recognizing the shared development goals between China and the Pacific island nations. The visit resulted in the signing of several agreements, covering areas such as police cooperation, economics, and technology. The Solomon Islands' shift in foreign policy to explore opportunities beyond the region is exemplified by this partnership with China. This move has drawn attention in the geopolitical landscape, particularly as the United States under the Biden administration seeks to re-engage with the Pacific region. As a response to the Solomon Islands' closer ties with China, the United States has announced plans to reopen an embassy in the country, indicating the diplomatic activities triggered by these developments.
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China's Export Control on Gallium Causes Global Price Surge
Global gallium prices experienced a significant jump in response to China's decision to tighten control over its exports of Gallium. This move by Beijing is retaliation against trade restrictions targeting China's semiconductor industry, which is part of broader efforts by the United States and Europe to reduce China's dominance in critical raw material supply chains. The cost of rare earth metals, including gallium, had already seen a slight increase between June and July 2023.
The US has been actively working to revitalize its own rare earth industry to lessen its dependence on China. However, challenges remain in overcoming China's economies of scale and closing the competence gap. China's recent ban on the export of germanium and gallium, metals commonly used in semiconductor manufacturing, is expected to exacerbate the global semiconductor shortage and intensify the competition for tech supremacy between China, the US, and Europe. The ban, set to take effect on August 1, requires companies to obtain approval to export certain gallium and germanium compounds.
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Foxconn Withdraws from Semiconductor Venture in India
Taiwan's Foxconn has announced its withdrawal from a $19.5 billion semiconductor joint venture with Indian conglomerate Vedanta, dealing a setback to Prime Minister Narendra Modi's chip making ambitions for India. The world's largest contract electronics manufacturer had signed an agreement with Vedanta last year to establish semiconductor and display production plants in Gujarat, Modi's home state.
While Foxconn did not provide specific reasons for the decision, both companies mutually agreed to end the joint venture, with Foxconn removing its name from the entity, which is now fully owned by Vedanta. The withdrawal is a setback to India's “Make in India” campaign, aimed at boosting domestic manufacturing and self-reliance in critical sectors such as electronics and semiconductors. Vedanta has expressed its commitment to the semiconductor project and has already lined up potential partners to establish India's first foundry. The Indian government remains confident in its ability to attract investors for chip manufacturing, with efforts ongoing to promote the development of the semiconductor sector.
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Algeria's Assertive Foreign Policy
Algeria's foreign policy has experienced a notable shift towards a more assertive approach in recent years, deviating from its traditional prudence and restraint. This change has sparked questions about the motives behind Algeria's new stance and its implications for regional dynamics. While some attribute the shift to Algeria's desire to regain an influential role, others highlight the potential risks associated with adopting a more offensive foreign policy strategy.
The consequences of Algeria's assertive foreign policy are multifaceted. The country's tougher stance has strained relations with neighbouring countries, particularly notable in the case of Morocco, with whom diplomatic ties were severed in 2021 due to the Western Sahara dispute. Additionally, Algeria's alignment with countries like Russia and Iran has sparked criticisms and accusations from Western governments. As Algeria navigates this new phase in its foreign policy, finding a delicate balance becomes crucial. It must consider the potential repercussions of its assertiveness, such as increased international pressure and strained regional relationships. The country will need to carefully weigh its strategic partnerships with countries like Russia and China, while maintaining diplomatic ties with the United States and the European Union.