In Geopolitics Today - Thursday, April 14th
China and the US Compete Over Iraq’s Energy, US Navy to Regularly Patrol the Red Sea, Qatar, Saudi Arabia and the UAE Make Major Investments in Egypt
China and the US Compete Over Iraq’s Energy
In recent years, China has emerged as Iraq’s top trading partner and the largest investor in the country’s considerable oil sector. Relations have been strengthening for years and the signing of major energy deals runs parallel with a lack of engagement from the United States in Iraq. Washington’s neglect has translated to a rising interest in Iraq’s energy production and export supply chains among some Chinese operators as Iraq has gradually become one of China’s largest suppliers of oil.
But things may be changing as the US has sought to accommodate the interests of the government in Baghdad by allowing a 120-day waiver to import electricity and gas from Iran, a move that may be a part of a struggle for influence in the country. Nevertheless, Chinese commercial interests have won a major hydrocarbon deal as the Asian giant continues to gain influence in the country. This latest deal is an engineering, procurement, and construction contract worth an estimated $412 million, and will see Chinese construction companies build a natural gas processing facility in Basra. While the country's oil, gas, and refining sectors provide plenty of economic upside for external actors, the geopolitical and military importance that comes hand-in-hand with such investments cannot be understated, a reality that both Washington and Beijing understand.
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US Navy to Regularly Patrol the Red Sea
The United States has announced it will establish a new multinational military force which will patrol the Red Sea and the Gulf of Aden. The new Task Force 153 of the US-led Combined Maritime Forces (CMF) will patrol the waterway between Egypt and Saudi Arabia, from the Bab al-Mandeb Strait to the waters just off the Yemen-Oman border. The task force is expected to include two to eight vessels at any given time, while the specific vessels involved have not been publicly named.
The areas where the new CMF is expected to operate are in a region that has seen increasing conflict between Houthi rebels and the Saudi-led coalition, as well as numerous acts of piracy which threaten the broader system of international trade which the US enforces with the use of military power. The reorganization comes as Houthi rebels in Yemen remain resilient and as Russia, a strategic rival and stated adversary of the US, makes inroads toward a possible deal for a naval base on the Red Sea. The rebels in the past have threatened military and civilian vessels with explosives to attack Saudi targets, and just last month launched missiles into the kingdom from Yemen.
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Qatar, Saudi Arabia and the UAE Make Major Investments in Egypt
Egypt has secured a total of $22 billion in investments from Qatar, Saudi Arabia and the United Arab Emirates to help cover the governments’ account deficit. Egypt has not been able to fully turn its economy around and remains deeply vulnerable to external shocks. The country has suffered from capital flight even before the war in Ukraine exacerbated the country’s economic woes. The conflict in Ukraine has dealt a severe blow to Egypt’s tourism sector, and has drastically driven up prices for basic commodities such as wheat and oil.
The three Gulf states have sought to make major investments in the Egyptian economy at a time of increased vulnerability and uncertainty. The first to make a major investment was the UAE, which announced its intention to invest $2 billion in the Egyptian economy via the Abu Dhabi Developmental Holding last month. Then on March 29, Qatar announced an agreement to invest $5 billion through a series of investments and partnerships with Egypt in which the two parties agreed to establish a joint committee which will be overseen by their foreign ministers. A day after Qatar announced its investment, Saudi Arabia deposited $5 billion in the Central Bank of Egypt, while another $10 billion in investments from Saudi Arabia is expected to come from an agreement between Cairo and Riyadh which is stipulated to facilitate investments from the Saudi Public Investment Fund in Egypt in the coming years.
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