In Geopolitics Today: Monday, October 9th
Global Gas and LNG Prices Stabilize Amid Mild Autumn, Suspected Leak Forces Shutdown of Balticconnector Gas Pipeline, and other stories.
Armenian Parliament Approves ICC Membership
The Armenian Parliament voted last week to ratify the Rome Statute and join the International Criminal Court (ICC), a move that will further strain Armenia's relationship with Russia. The ICC has an outstanding arrest warrant against Russian President Vladimir Putin. As an ICC member state, Armenia would be obligated to detain Putin should he visit the country. Moscow has warned Yerevan against joining the court, calling it an unfriendly act. Armenian officials cite the desire to potentially bring charges in the ICC against Azerbaijan for aggression and alleged war crimes against ethnic Armenians.
The move to join the ICC underscores the deteriorating strategic alliance between Armenia and Russia. Their relations have frayed in recent years over several issues. Armenia was unhappy with Russia's role as a peacekeeper in Nagorno-Karabakh after Armenia's 2020 defeat to Azerbaijan. Yerevan also felt abandoned when Russia did not provide military aid during Azerbaijan's latest attacks. More broadly, Russia disapproves of Armenia's growing ties with the West. Meanwhile, Armenia is disappointed with the lack of security guarantees from Russia and the Russia-led CSTO. It remains to be seen how Russia will respond and whether Armenia will distance itself further from Russian-dominated security blocs.
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Global Gas and LNG Prices Stabilize Amid Mild Autumn
Global gas and liquefied natural gas (LNG) prices have stabilized in recent weeks. Mild autumn weather has dampened heating demand so far across the Northern Hemisphere. Gas storage levels in Europe are nearly full, reducing the need for additional imports. With European buyers less desperate for cargoes, the tug-of-war between Europe and Asia for LNG has eased. The European benchmark TTF gas price has fallen substantially from its summer highs and narrowed the gap with Asian LNG spot prices. The economics for floating LNG cargoes into Europe this winter have deteriorated as a result.
The lull in the global gas market likely won't last long. While Europe's gas demand took a hit in 2022, the region remains heavily reliant on imports and exposed to supply shocks. Any colder than normal weather or drop in pipeline supplies from Norway or Russia could quickly reignite Europe's scramble for LNG cargoes. Even a mild supply disruption could trigger an outsized price spike given the market's jittery state. For now, a fragile balance exists between global supply and demand. But the geopolitical risks haven't gone away, and it may not take much to tip the market dynamics back into chaos. The lead-up to winter will be an anxious watch for gas buyers and governments in Europe and Asia.
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US Reversal on Border Wall Sparks Tensions with Mexico
The Biden administration announced last week that it will construct new sections of border wall in Texas, despite Mexico's objections. This reversed the administration's previous opposition to further wall construction. Mexican President Andrés Manuel López Obrador criticized the decision, calling it a “step backward” before meeting with senior US officials. Mexico's foreign minister also reiterated the country's stance of favouring “bridges not walls.”
The border wall construction highlights increasing desperation efforts to curb migration flows. While a symbolic issue for Mexico, the wall is unlikely to significantly decrease overall crossings. It may only shift encampments geographically. The administration likely hopes the wall signals intelligence resolves this, but its effectiveness is doubtful given migrants' determination. The wall risks straining bilateral ties with Mexico again after years of turbulence. But Mexico's protests may remain only rhetorical as long as the wall does not create major economic or security problems.
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USS Gerald R. Ford Deployed in Support of Israel
The US announced it is deploying the aircraft carrier USS Gerald R. Ford and other naval assets to the Eastern Mediterranean in support of Israel after the major escalation of violence between Israel and Hamas. Israel has declared war and authorized significant military retaliation against Hamas after the militant group's unprecedented rocket barrage reaching deep into Israel. Along with the carrier group, the US is sending additional fighter jets to the region and approving new military assistance for Israel's defence forces.
The substantial US naval deployment underscores Washington's concern about the conflict spiralling further out of control. While reaffirming US solidarity with Israel, the show of military force seems partly aimed at deterring the fighting from intensifying. But with passions inflamed on both sides, the risks of further escalation remain high despite international ceasefire efforts. The US is also keen to prevent any smuggling of more arms to Hamas and Palestinian militant groups. Beyond containing the violence, the deeper challenge will be promoting a long-term solution. Without political progress on core disputes, periodic eruptions of hostilities between Israel and Gaza seem inevitable.
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Myanmar Rare Earth Mining Suspension Sparks Price Surge
A recent suspension of rare earth mining activities in Myanmar's Kachin state has caused an immediate spike in global rare earth prices. Myanmar is a major supplier of rare earths, providing 38% of China's imports. The mining halt is to allow for inspections but has raised worries about potential supply disruptions. It has prompted stockpiling by consumers ahead of peak demand periods. Prices of rare earths and magnets hit multi-month highs as a result.
The episode highlights concerns about over-reliance on single supply sources for rare earths, which are essential for high-tech and defence industries globally. China dominates both mining and processing capacity. But even China depends significantly on imports from Myanmar. With China's economy slowing, its domestic demand rising and geopolitical risks, diversification of rare earth sourcing is increasingly necessary. Any prolonged supply bottlenecks risk harming industries across technology, defence and clean energy. Yet building resilient and ethical rare earth supply chains globally remains a complex challenge for many powers, requiring long-term policy commitment.
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Suspected Leak Forces Shutdown of Balticconnector Gas Pipeline
The Balticconnector underwater gas pipeline linking Finland and Estonia was abruptly shut down over the weekend due to a suspected leak. Operators in both countries reported an unusual pressure drop in the pipeline early Sunday morning, triggering immediate safety concerns. All gas flow through the strategic pipeline was halted as a precaution. Investigations are now underway to locate and assess the suspected leak, which could take days or weeks. Repairs may extend over several months depending on any damage found.
The vulnerability of critical energy infrastructure and geopolitical anxieties around pipeline security is a key issue. It comes after the apparent sabotage of the Nordstream pipelines connecting Russia and Germany. While the cause in this case is still unclear, the timing fuels worries. The pipeline shutdown leaves Finland more reliant on LNG imports. For Estonia, ample reserves in neighbouring Latvia reduce supply risks for now. But any prolonged outage would have ripple effects on regional energy markets and cooperation. The episode underscores the need for rigorous maintenance and security precautions to safeguard vital pipelines.