In Geopolitics Today - Monday, September 20th
Natural Gas & the UK and Afghanistan’s Geoeconomic Future
Natural Gas & the UK
The price of the natural gas futures has more than doubled between January and August this year. Suppliers are paying more for natural gas to be delivered in the coming months compared to what they pay on the spot today. A rise in natural gas futures means that buyers and sellers on the markets are expecting natural gas to be more expensive in the months ahead. But production has remained relatively stable, falling by less than 3% globally in 2020.
The United Kingdom sources 44% of its natural gas from reserves found in its surrounding seas, a further 47% via pipeline from Norway and Russia, and the remaining 9% arrives as Liquefied Natural Gas (LNG) via ocean tankers. While the UK has long maintained a steady regional supply of natural gas, the surge in seaborn LNG tankers over the last couple of decades have transformed it into a globalized commodity. At the same time, the deregulation and financialization of the UK’s natural gas has exposed consumers to the volatilities imposed by geopolitics on the market price of natural gas.
In 2020, the UK imported most of its LNG from Qatar, the US and Russia, and of the three Russia has reportedly reduced its gas shipments to continental Europe, which has resulted in European natural gas stockpiles to sit at historic lows. This reduction has sparked fears of a regional natural gas shortage across Europe, which has in turn pushed up natural gas prices. Russia accounts for roughly 25% of global natural gas production and supplies about 40% of the natural gas consumed in Europe each year, making its state-owned giant Gazprom a major player in European — and the UK’s — energy market(s).
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Afghanistan’s Geoeconomic Future
The limits of military might in Afghanistan have been amply demonstrated by the withdrawal of both Soviet and American forces. Each power entered their respective misadventures as the overwhelmingly superior belligerent against local insurgent forces, and each depleted their power, resources, and will in the process. With the Taliban now consolidating power in Afghanistan, how the Islamic Emirate will utilise the substantial amounts of strategic metallic minerals will largely determine Afghanistan’s role in the region.
Research conducted at a time when Afghanistan was still under the NATO occupation has suggested that the country’s mineral wealth contains an estimated 1.4 million tons of rare-earth minerals. Afghanistan is a country abundantly rich in metals crucial for the production of batteries for electronic devices, electric cars, and solar technologies. Afghanistan is also a leading producer of opium which can operate as a highly strategic commodity. How the Taliban chooses to approach opium production and trade will be consequential. Whether the Taliban will be able, or indeed willing, to apply and enforce appropriate standards and regulations over the production of poppy remains to be seen, and will prove to be challenging regardless. The Taliban could also choose to engage in illegal drug sales, or even to weaponize opium flows against hostile international forces, a powerful yet risky capability.
Afghanistan possesses considerable geoeconomic value to the region too. Kabul can play a pivotal role in China’s Belt and Road Initiative. Access to the vast deposits of mineral wealth and energy resources in Afghanistan would spur economic growth and regional infrastructure development. If Kabul and Beijing are able to ensure security for an infrastructure transformation, Afghanistan could be regionally integrated as a transit hub between Iran and Central Asia, and Central Asia and Beijing. And there appears no one better position to attempt such an endeavour than China, as they have the necessary capital, political will and capability to realistically develop the infrastructure networks required.
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