In Geopolitics Today: Monday, July 24th
India Imposes Rice Export Ban, Sudan Faces Imminent State Collapse, and other stories.
Argentina and IMF Make Progress on Credit Program Review
Argentina and the International Monetary Fund (IMF) have made progress on the fifth review of Argentina's credit program. Technical advisors from both parties have reached an agreement on the core objectives and parameters, laying the foundation for a 'Staff Level Agreement.' The accord aims to consolidate fiscal order and strengthen reserves, taking into account the challenges posed by drought, export damages, and fiscal revenues in the country. Argentina has sought to relax the goals of the credit program and obtain disbursements, facing difficulties in meeting targets and reducing the fiscal deficit.
Argentina's economy faces significant hurdles, including difficulties in meeting financial commitments and addressing pressing economic issues. The upcoming agreement with the IMF could provide much-needed relief, with disbursements of up to US$10.4 billion anticipated. The government plans to announce measures in Buenos Aires to bolster reserves and enhance fiscal sustainability, including potential tax adjustments on imports and changes to the agricultural dollar for specific exports. As Argentina works to navigate its economic challenges, close attention will be paid to how the IMF Executive Board responds to the staff-level agreement, which could shape the country's financial trajectory moving forward.
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Turkey’s Geopolitical Profile
Turkey stands as a natural middle power in the geopolitical landscape, striking a delicate balance between pursuing its core interests and avoiding great power opposition. Geographically positioned between Europe and Asia, Turkey enjoys economic opportunities and strategic advantages in Anatolia, its historical heartland. However, the same position exposes it to security threats from powerful neighbouring countries. As the global geopolitical environment remains fragmented, Turkey must maintain a cautious and pragmatic approach to assert its policies independently while treading carefully to prevent unravelling the state.
During the Cold War, Turkey aligned with the West against Soviet influence, shaping its domestic and foreign policies. As the world transitioned into a multipolar order, Turkey found itself manoeuvring between various powers to secure its interests. Today, the country's outlook is defined by maintaining a cautious balance between great powers and middle powers, while its ideology of Islamic nationalism influences its political system. The nation's imperatives include maintaining access to global markets, preventing the emergence of an independent Kurdish state, and preserving its internal unity. While navigating between great powers, Turkey’s resilience and strategic outlook are key to successfully pursuing its core interests and preserving stability in the region.
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India Imposes Rice Export Ban
India has ordered a halt to its largest rice export category, non-basmati white rice, in response to a 3% increase in retail rice prices caused by damage to crops from late heavy monsoon rains. The move is expected to halve India's rice shipments, triggering fears of further inflation on global food markets. India is the world's largest exporter of rice, accounting for more than 40% of world rice exports, making any reduction in shipments significant for the global food supply.
The ban on non-basmati white rice comes as the country grapples with low inventories, and it could have implications for food prices, which have already been influenced by factors such the war in Ukraine and unpredictable weather patterns. However, the ban does not include parboiled rice, which represents a substantial portion of India's rice exports. The sudden disruption in rice exports is likely to have repercussions beyond India's borders. African buyers, as well as countries like China and the Philippines, who primarily purchase rice from Vietnam and Thailand, may face challenges in securing sufficient rice supplies at competitive prices.
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Iran's Reimagined Fleet-in-Being Strategy
In recent discussions about Iran's asymmetric capabilities and maritime tactics, the potential employment of a historical maritime strategy called the fleet-in-being has been overlooked. Originating in the 17th century, the fleet-in-being strategy allows weaker navies to challenge superior ones by avoiding direct engagement while using proxies to harass and disrupt enemy operations at sea. In today's context, Iran's fleet-in-being strategy would rely on proxies in the eastern Mediterranean and Red Sea armed with advanced weapons like unmanned aerial vehicles, surface vessels, anti-ship missiles, naval mines, and fast attack craft.
Over the past five years, Iran and its proxies have demonstrated a growing capability for a proxy fleet-in-being. Iran's proliferation of advanced weapons to proxies in Lebanon and Yemen has enabled attacks on commercial shipping and major trade routes, with limpet mines, drones, and anti-ship cruise missiles being employed against Saudi, Emirati, and Israeli tankers. Houthi unmanned surface vessels have also shown the ability to target warships and commercial vessels in the Red Sea. A proxy fleet-in-being strategy by Iran could significantly affect vital regions, force adversaries to protect distant sea lines of communication, and pose a threat to rival naval operations.
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Sudan Faces Imminent State Collapse
Sudan's complex history of conflicts, governance challenges, corruption, and economic vulnerability has led to its classification as a fragile or failed state. Currently, the country is grappling with an unprecedented crisis, with the Rapid Support Forces (RSF), a paramilitary group formed during Omar al-Bashir's rule, controlling significant territories.
In the capital, Khartoum, clashes between the RSF and the Sudanese military have resulted in widespread destruction of public facilities and looting of properties. This has severely impacted essential services and state institutions, leaving the city in disarray. Meanwhile, international actors are faced with the difficult choice of how to respond to the situation, as the RSF's actions threaten the fragile state of Sudan. While some efforts have been made to investigate the RSF's actions and support the Sudanese state, meaningful intervention by outside powers may be necessary to prevent a catastrophic collapse with far-reaching implications for the entire region.
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Russia Faces Challenges in Energy Markets as Trade Flows Shift
Russia has faced significant challenges in the European energy market. Europe, once a major importer of Russian crude, has shifted towards LNG imports and banned Russian crude and petroleum products. The United States has stepped in to fill the gap, with US oil producers and LNG exporters benefitting from the changing trade flows. On the other hand, China and India have emerged as key buyers of Russian crude, with India becoming Moscow's most important market alongside China.
With Europe reducing its dependence on Russian fossil fuels, Asian customers like China and India have become vital for Russia's energy exports. India, in particular, has seen a surge in Russian crude imports, but analysts believe that it may soon reach its limit due to infrastructure constraints and a need to diversify its crude oil suppliers. Additionally, Europe and China are engaged in competition to secure long-term LNG supply deals with US LNG developers and exporters, driving more opportunities for US LNG export terminals. As geopolitical dynamics continue to evolve, energy markets are witnessing significant shifts with implications for global energy trade and security.