In Geopolitics Today: Monday, March 4th
MENA Region's Hydrogen Industry Gains Momentum, Allies Rally Behind Argentina in $16 Billion Judgment Appeal, and other stories.
MENA Region's Hydrogen Industry Gains Momentum
The Middle East and North Africa (MENA) region is making significant strides in developing its hydrogen industry, with Saudi Arabia's NEOM green hydrogen project leading the way. The $8.4 billion project, set to begin production in 2026, will deploy 4GW of wind and solar power to produce 600 tonnes of hydrogen per day and up to 1.2 million tonnes of green ammonia annually for export. Other MENA countries, such as Oman, the UAE, Egypt, and Morocco, are also developing their hydrogen industries, each with unique approaches tailored to their specific needs and resources.
Despite the progress made in the region, the hydrogen industry still faces challenges, particularly on the demand side. Many projects are stalled as they await agreements, especially from Europe. The development of policies and infrastructure in importing countries is crucial for the growth of the hydrogen market. While export-oriented projects may face more uncertainty, the overall foundation for the hydrogen industry is becoming more robust. As countries continue to develop plans and industry incentives, and projects like NEOM demonstrate the feasibility of large-scale hydrogen production, the region is poised to become a major player in the global hydrogen market.
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Russia's Mercenary Industry Transforms
Since Russia's annexation of Crimea in 2014, the country's mercenary industry has undergone a significant transformation, with private military companies (PMCs) and paramilitary formations taking on more prominent roles in military operations abroad, particularly in Africa. Russia's mercenary industry consists of armed groups, “governors' armies,” and semi-private mercenary formations owned by prominent individuals and state corporations.
Despite the proliferation of these “private armies,” their overall impact on the battlefield has been marginal. The reliance on these loosely coordinated formations has fragmented the Russian Armed Forces rather than strengthening their capabilities and performance. Moscow's continued dependence on these entities is driven by a desire to avoid large-scale, coercive mobilization that could trigger widespread protests and criticism. However, the emergence of new PMCs and paramilitary formations will inevitably lead to further militarization of Russian society. As the war in Ukraine continues to strain the Russian military and disrupt the home front, the growth of these competing mercenary structures may eventually threaten Russian military power.
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Allies Rally Behind Argentina in $16 Billion Judgment Appeal
Several South American economies, including Brazil and Chile, have called for a US appeals court to overturn a record $16 billion judgment against Argentina for violating shareholders' rights during the expropriation of national oil company YPF. The ruling has become a significant challenge for Argentine President Javier Milei's new administration, as the cash-strapped country argues that it cannot possibly pay the sum, which amounts to 45% of its annual budget for 2024.
Brazil, Chile, Uruguay, and Ecuador have joined Argentina in its challenge, filing briefs asserting that allowing the judgment to stand would constitute US interference in the legal affairs of other sovereign states. They argue that the district court misapplied crucial doctrines designed to respect the prerogatives of foreign sovereigns and their courts, protect foreign litigants from the burdens of litigating in the US, and safeguard against the misapplication of foreign law. The countries warn that the threat of increased judgments by US courts, based on tenuous connections to the US, could discourage South American corporations from participating in US capital markets and conducting commerce with US-domiciled companies.
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Bulgaria Halts Russian Oil Imports Ahead of EU Deadline
Bulgaria has stopped importing Russian oil as part of the European Union's embargo. Although the EU granted Bulgaria a two-year exemption from the embargo on Russian crude, initially set to last until the end of 2024, the country's parliament voted in December to stop all imports of Russian crude oil starting this month. Bulgaria's plan for cutting off Russian-supplied oil envisioned a 50% reduction of imports starting in January and an additional 25% reduction starting in February. Bulgaria plans to replace Russian oil imports with crude from Kazakhstan, Iraq, and Tunisia.
Bulgaria's decision to stop importing Russian oil ahead of the EU exemption deadline highlights the country's efforts to diversify its energy sources and reduce its near-total dependence on Russia. However, this transition may prove challenging due to the lack of adequate port infrastructure and the congestion of the Bosphorus Strait. The Burgas refinery, operated by Russia's Lukoil, is designed to process Urals oil and currently can only run on sour grades, which are difficult and expensive to source in the EU. The profitability of the plant is also affected by a 60% tax imposed by Bulgaria's government on the refinery's profits. Lukoil is reviewing its strategy regarding assets in Bulgaria and may consider selling them, further complicating the country's energy landscape.
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Russia's Arctic Strategy Reveals Ambitious Plans for Resource Expansion
Russia's Arctic strategy reveals ambitious plans to expand its jurisdiction over continental shelf resources, despite overlapping claims by other Arctic states. A December speech by a top Russian naval official pointed to full-scale development beyond Russia's 200-mile exclusive economic zone, framing the Arctic as a “strategic resource base” tied to national defence priorities. This aligns with strategic documents that position the Arctic's future prosperity as integral to Russia's geopolitical transformation into a Eurasian coastal power.
Russia's strategic documents indicate it will assertively negotiate its continental shelf claims in line with unconditional prioritization of national interests rather than impartial adherence to international law. This reflects an instrumentalist view of legal conventions as frameworks for advancing great power prerogatives. Moreover, the documents justify responding to hybrid warfare from Western states. If relations remain fractured, Moscow may turn to coercive grey-zone tactics to bolster its bargaining leverage. While open Arctic conflict seems unlikely, Ottawa, Copenhagen, and Washington are preparing capabilities enabling situational awareness and deterrence.
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South Korea Pursues Diversification of Critical Mineral Supply Chain
As a major global producer of batteries, semiconductors, and electric vehicles (EVs), South Korea has a compelling need for reliable supplies of critical minerals to fuel its industry. However, the country is poor in mineral and energy resources and has few reserves of critical minerals, making it heavily dependent on imports. South Korea's geostrategic situation, including its proximity to China and North Korea, contributes to a sense of strategic and economic insecurity.
To reduce its vulnerabilities and build resilience, South Korea is pursuing policies aimed at diversifying its critical mineral supply chain and positioning itself as a leader in advanced technologies. The country is committed to transitioning away from its heavy dependence on imported fossil fuels and transforming its industry to a clean energy economy. The Korean government has been responsive to the priorities of the country's large conglomerates, which are heavily dependent on critical mineral imports for their manufacturing processes. As a result, the government has developed a series of policies to reduce dependence on a single supplier through an activist resource diplomacy, including offering industry support and incentives for Korean investment in overseas exploration and development projects.