In Geopolitics Today: Thursday, February 1st
EU Unites to Approve $54 Billion in Ukraine Aid, Australian Copper Exports to China Rebound, and other stories.
EU Unites to Approve $54 Billion in Ukraine Aid
The EU approved $54 billion in financial assistance for Ukraine through 2027 after Hungary dropped objections, avoiding a rift. To secure unanimity, Viktor Orbán obtained future periodic reviews for how the money will be spent but rescinded its veto power over aid transfers. Reaching compromise revealed tensions between demonstrating unity against Russia and addressing internal disagreements over conditions placed on member state funding.
For Ukraine, the aid offers longer-term fiscal reliability as unpredictable US support wavers due to political disputes. However, the package risks inefficient allocation as the war evolves if funds prove inflexible across categories. While unanimity was maintained, recurring brinkmanship risks straining shared positions. Nevertheless, the deal signifies Europe's willingness to financially sustain Ukraine amid shifting allies. Yet, smooth passage still requires reconciling competing imperatives — both strengthening internal cohesion against external threats and resolving valid concerns fuelling internal leverage points.
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US Approves Strikes Against Targets in Iraq and Syria
The United States is preparing retaliatory strikes against Iranian targets across Iraq and Syria. While direct Iran confrontation remains unlikely, targeting storage sites and commanders aims to degrade the capacity of militias to facilitate attacks. This balancing hopes to signal resolve without triggering uncontrolled escalation.
However, risks loom on all sides. Without addressing root incentives around sanctions, missiles and demands, conditions enabling Iran’s escalation strategy persist. Its success breeding radicalized proxies nurturing anti-US and Israeli sentiments are becoming ever-harder to contain. So while tactical reprisals register immediate objections to deadly assaults, restoring mutual deterrence hinges on navigating respective red lines towards de-escalation.
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India Bolsters Naval Presence Across Western Indian Ocean
India has deployed its largest-ever naval presence in the western Indian Ocean, with over a dozen warships and surveillance aircraft patrolling east of the Red Sea and northern Arabian Sea. While not part of the U.S.-led Red Sea task force, India aims to fill security gaps, having investigated over 250 vessels amid a resurgence of piracy after a years-long lull.
India's expanding deployment displays its increasing capability and willingness to shoulder regional responsibility. But while tactical assets provide short-term deterrence, sustained results require strengthening governance and coastal communities. Piracy originating from Puntland surged last decade as Somali state failure enabled the lucrative, low-risk enterprise, until coordinated naval efforts and onshore capacity building helped dismantle those criminal networks. Now economic privation, ongoing illegal fishing, and faltering domestic law and order have catalysed opportunistic attacks anew. Though the recent incidents seem unlikely to reach previous peaks, naval power cannot single-handedly manage the underlying grievances driving coastal crimes.
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Mali, Burkina Faso and Niger Announce Withdrawal from ECOWAS
The governments of Mali, Burkina Faso, and Niger have jointly announced their decision to immediately withdraw from the Economic Community of West African States (ECOWAS). They accused ECOWAS of betraying its ideals and failing to assist their fight against Islamist insurgents, as well as imposing illegal sanctions. ECOWAS, still refusing to recognize the new governments, responded that it had not received formal notification and the countries remain members bound by obligations.
This withdrawal represents a blow to regional integration under ECOWAS and the leverage it provided for local and foreign entities. While no formal exit has been finalized, the statement of intent threatens foundational ECOWAS principles. Practical impacts jeopardizing free movement and economic cooperation may prove significant given the countries' landlocked geography and dependence on coastal neighbours. As countries that rely on coastal neighbours' ports, reduced regional cooperation could further destabilize their precarious economies.
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Plans for EU Corporate Investment Restrictions in China Scuttled
The European Commission has unveiled its 2023 EU Strategy for Economic Security, but a centrepiece plan to enable restrictions on corporate outbound investments to China failed due to German business resistance. Instead, the Commission will merely collect data and reassess next year. Similarly, hoped-for export controls lacked teeth compared to earlier ambitions of blacklisting technologies. But foreign investment scrutiny and university research ties saw calls for tighter oversight.
The scuttling of binding corporate investment screening demonstrates the lingering sway of economic dependencies, even as political winds shift. The episode's strategic effects remain ambiguous — reduced access could accelerate China's self-sufficiency, while controls may have slowed voluntary divestment anyway as companies hedge bets. Still, the discordant outcome highlights Europe's continued vulnerability to internal divisions exploited through coercive leverage. As China increasingly subsidizes state-backed firms, relying purely on market forces risks one-sided openness. Some coordinated balancing thus seems prudent.
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Australian Copper Exports to China Rebound
Australia's copper exports to China reached a three-year high in November 2022, totalling 27,500 metric tons. This reversal comes after an unofficial Chinese ban on Australian copper in 2020, when Australia provided around 80,000 tons per month. The increase indicates thawing China-Australia relations and China's burgeoning demand for imported copper.
Restoring over a third of peak exports signifies cautious optimism for stabilizing bilateral engagement after a tumultuous period. However, the opacity around China's use of copper stockpiles muddies projections on actual market impacts. On one hand, stockpiling could sterilize significant volumes during supply crunches, limiting price spikes but also price signals for bringing more supply online. On the other hand, releasing national reserves for commercial offtake instead might further tighten the global market. Should relations between China and Australia meaningfully strengthen on a strategic level, having Australia diversify China's copper import sources could reinforce supply chain resilience for the world's largest consumer amidst growing needs.