In Geopolitics Today: Thursday, January 18th
Iran and Pakistan Exchange Missile Fire, Germany Reluctant to Deliver Taurus Missiles to Ukraine, and other stories.
Iran and Pakistan Exchange Missile Fire
Iran conducted missile and drone strikes on January 16th targeting the militant group Jaish al-Adl in Pakistan's Balochistan province, sparking retaliation from Pakistan. Pakistan struck 7 locations inside Iran the next day, targeting Jaish al-Adl hideouts in an intelligence-based operation. This has sparked a diplomatic crisis, with Pakistan recalling its ambassador from Tehran and barring Iran's ambassador from returning.
While aiming to signal resolve, further military action risks entangling escalations ahead of Pakistan's elections. Domestic pressures to firmly respond persist given recent anti-military sentiments. However, economic and political fragility plus unclear targeting options constrain aggression. This crisis illustrates regional volatility — disputes over cross-border militancy can quickly spiral despite ostensible bilateral progress, as underscored by the Iranian foreign minister meeting Pakistan’s caretaker PM in Davos the same day.
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Red Sea Disruptions Test LNG Markets
Escalating Middle East tensions have disrupted LNG shipments through the Red Sea and Suez Canal. Qatar has paused cargoes to Europe, while data shows tankers halted Red Sea travels. This forces longer voyages around Africa, raising costs and transit times. Yet Asian spot prices hit 7-month lows on inventory buffers while European gas futures plunged to 2-year lows, defying heightened geopolitics.
At this time, Europe and Asia appear to be in a position to weather LNG supply risks this winter thanks to demand softness and adequate storage. Europe enjoys uninterrupted Norwegian pipeline gas and sufficient overall LNG imports. Alternative supply chains are also emerging, with potential for US cargoes to Asia freeing up Qatar to divert to Europe. With inventories providing resilience, markets are shaking off the Red Sea crisis. But instability injects uncertainty, underscoring the value of contingency planning.
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Azerbaijan and Armenia Trade Barbs As Peace Talks Stall
Azerbaijan has revived Baku’s push for the Zangezur corridor — a transport link across Armenia connecting Azerbaijan proper to its exclave of Nakhchivan. Azerbaijani President Ilham Aliyev has also reignited tensions by demanding Armenia return control of seven Azerbaijani villages that have been under Armenian occupation since the First Nagorno-Karabakh War in the 1990s.
His combative remarks firmly assert Azerbaijan's stances on these disputes amid protracted negotiations over border delimitation and a final peace agreement after the 2020 Second Nagorno-Karabakh War. Armenian Prime Minister Nikol Pashinyan responded furiously, decrying Aliyev’s comments as “totally unacceptable” and accusing him of sabotaging the peace process. Deep disagreements persist between the countries across major issues like territorial access corridors, potential exchanges of enclaves and villages, and the withdrawal of Azerbaijani troops from Armenian lands. With talks deadlocked over these flashpoints and principles for a comprehensive settlement still up in the air, inflammatory rhetoric from both leaders fans tensions despite their avowed commitment to achieving sustainable peace.
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Chancay Port Promises to Extend China's Reach into South America
China's $3.5 billion Chancay port project in Peru, its first controlled port in South America, will open this November after over 5 years of construction. With the capacity to harbour mega cargo ships, the Cosco-led port provides a direct Pacific gateway to Asia for exports. It cement Beijing's status as the region's top trade partner and could make Peru a logistics hub between South America's producers and China.
The port epitomizes China's growing economic clout and political ties in the region, even as the US warns Latin American nations about over-reliance on Beijing. With Chinese trade with the region dwarfing that of the US, China leverages its position to upgrade diplomatic relations and court new leaders. While still facing some pushback, Beijing's patient infrastructure diplomacy is paying dividends. As South America's resources grow in global importance, China's foothold through nodes like Chancay gives it an edge over rivals.
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Philippines and China Hold Talks to Ease South China Sea Tensions
China and the Philippines held diplomatic talks on January 18th aiming to reduce South China Sea tensions, including around the disputed Second Thomas Shoal. Both sides agreed to improve communication and properly manage conflicts through friendly consultation.
The negotiations indicate neither country desires further escalation, underscoring mutual interests in stability. However, deep disputes remain unresolved. Manila continues strengthening defence ties with the US and its allies to push back against increased Chinese assertiveness. With the Philippines balancing cooperation and standing firm on claims, managing tensions hinges on avoiding overly coercive actions. Further restraint could open space for preventing spirals while shelving issues that cannot realistically be solved now.
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Germany Reluctant to Deliver Taurus Missiles to Ukraine
Germany's parliament voted against supplying Ukraine with Taurus cruise missiles, rejecting a proposal from the opposition Christian Democratic Union. This non-binding vote leaves the final decision to Chancellor Scholz, who has previously voiced opposition to the approval of Taurus transfers. In contrast, France's President Macron announced sending additional SCALP-EG cruise missiles and other military aid.
Ukraine is requesting long-range missiles like the Taurus and SCALP-EG to continue striking Russian assets far behind enemy lines. So far, France and the UK have provided significant numbers of the latter missile, which Ukraine has used to devastating effect against targets in Crimea. With battlefield momentum stalled, these deep strikes add steep costs to Russian operations and work to sustain morale. Germany's reluctance risks leaving Ukraine more dependent on French and British generosity. However, domestic pressure to match may still prompt Berlin to revisit approving Taurus exports.