In Geopolitics Today: Monday, May 8th
Arab League Reinstates Syria After 12-year Suspension, US Meets with Middle East Allies to Counter China's Influence, and other stories.
Global Central Banks Set New Q1 Record with Accelerated Gold Buying
The first quarter of 2023 saw central banks around the world continuing to buy gold at an accelerated pace, setting a new Q1 record. Global central bank gold reserves increased by 228 tons during the first three months of the year, which was a 38% increase from the previous first-quarter record set in 2013. The World Gold Council reports that there are two main drivers behind central bank gold buying: its performance during times of crisis and its role as a long-term store of value.
The Monetary Authority of Singapore was the largest single buyer during the quarter with an addition of 69 tons to its reserves, and China officially increased its gold reserves by 58 tons. Other notable buyers in the first quarter were Turkey, the Reserve Bank of India, the Czech Republic, and the Philippines. Meanwhile, the Central Bank of Uzbekistan, the National Bank of Kazakhstan, Cambodia, UAE, and Tajikistan were the largest sellers of gold during the same period. The robust central bank gold buying trend is expected to continue in the short term, with little to indicate that this will change anytime soon.
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Arab League Reinstates Syria After 12-year Suspension
The Arab League has voted to reinstate Syria to the group after a 12-year suspension. The move will allow limited humanitarian and security-focused cooperation, including more aid for earthquake damage and anti-drug smuggling operations. However, the US is unlikely to lift sanctions on Syria anytime soon, meaning deeper economic cooperation with the country will remain difficult.
Syria's return to the Arab League is a significant diplomatic victory for President Bashar al-Assad, who has been isolated for years and held onto power with crucial support from Iran and Russia. With the war far from over, analysts say that sanctions are likely to continue to deter investment, which will further damage Syria's already battered infrastructure and industry. However, Assad is hoping that normalisation with wealthy Gulf nations could bring economic relief and money for reconstruction.
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Japan and South Korea Make Progress in Mending Ties
Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk-yeol have made strides in mending ties between their countries during Kishida's recent visit to Seoul. The leaders agreed to cooperate on securing supply chains, including semiconductors, and deepen military-to-military and parliament-to-parliament ties. They also focused on regional security cooperation in the face of North Korea's nuclear threats, which both leaders see as a significant challenge.
The biggest obstacle to better Japan-South Korea relations has been the unresolved historical issues stemming from Japan's 1910-45 occupation of the Korean peninsula. Although Kishida did not offer a new official apology during his visit, he said his government inherits the stance of earlier administrations, some of which have issued apologies. South Korean President Yoon has proposed that South Korean businesses compensate the victims of wartime labour rather than Japanese companies, which has triggered a strong backlash from some of the victims. Despite these challenges, the two leaders are attempting to usher in a new chapter of bilateral relations.
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US Meets with Middle East Allies to Counter China's Influence
On Sunday, US National Security Advisor Jake Sullivan met with Saudi Arabia’s Crown Prince Mohammed bin Salman, along with officials from India and the UAE. The initiative aimed to check China's growing influence in the region, following the formation of a forum called I2U2, which includes the US, Israel, the UAE, and India. India's involvement in the initiative comes amid New Delhi's growing relationship with Israel and follows major investments in projects like Haifa Port.
Washington also sees cooperation between Saudi Arabia, India, and Israel as a way to counteract Beijing's growing influence in the region. The US has tried to build on the Abraham Accords by securing the establishment of official diplomatic relations between Israel and Saudi Arabia. However, Riyadh has irked the US by pursuing a more independent foreign and energy policy, and ties between the decades-old allies have come under strain after Biden took office. Despite attempts to patch up ties, the trip by Sullivan comes amid concerns about Saudi Arabia's attempts to pivot its foreign policy, particularly in Sudan.
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EU and US Face Dilemmas in Sharing Middle East Security Obligations
As the United States begins to reprioritize its interests away from the Middle East to the Pacific, the European Union (EU) may have to shift its focus to the Middle East and North Africa as way to address evolving geopolitical realities. Europe's close proximity to the region, dependence on oil imports, and the threat of Islamic terrorism make it essential for the EU to maintain access to the energy resources in the region and secure core interests there.
However, the US continues to bear high military and economic costs associated with securing the EU’s interests in the Middle East, while the Europeans benefit at little cost. This has created a vicious circle, as the US is failing to provide incentives to the Europeans to build their militaries to take care of their own interests in the Middle East. The US has little choice but to continue doing the job, and the question remains whether the US and its European allies can find a way out of this vicious circle.