In Geopolitics Today: Thursday, July 7th
US Funds Set to Make Oil Investments in Venezuela, High Lithium Prices Affecting Electric Vehicle Markets, and other stories.
US Funds Set to Make Oil Investments in Venezuela
Two major investment funds from the United States are reportedly looking to acquire a stake in an oil project off the eastern coast of Venezuela. Gramercy Funds Management and Amos Global Energy are said to be preparing to partner with the Venezuelan-based Inelectra group, in a move that signals a loosening of the sanctions imposed by the US on Venezuela.
Despite the fact that US companies are barred from doing business with state-owned companies in Venezuela, the urgent need for increased oil supplies appears to be overriding Washington’s policy of “maximum pressure” toward Caracas. The two US firms involved in the joint venture have said that their proposals would positively contribute to “balancing oil supply and demand,” and that the venture will lead to “lower fuel prices for American consumers.” For Caracas, such deals with the United States are an opportunity to escape international isolation, achieve sanctions relief, and raise state revenues from increased oil production.
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US Pressures the Netherlands to Restrict Chipmaking Exports to China
The United States is attempting to pressure the Netherlands to place more restrictions on Dutch companies selling semiconductor fabrication equipment to Chinese companies. Washington reportedly wants the Dutch government to block the ASML Holding — the world's top manufacturer of lithography machines — from being able to export deep ultraviolet lithography machines to Chinese companies.
ASML has a dominant market position on the manufacture of lithography systems, machines which are vital for chipmakers. Complicating matters for the Dutch government is the fact that China is ASML's third largest market, representing roughly 16 percent of sales in 2021. Lithography systems are expensive to produce and use focused beams of light to create the circuitry of computer chips. Lithography and other semiconductor manufacturing equipment also require an export license, as computer chips are considered a “dual use” technology, mean it has both military and commercial applications.
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High Lithium Prices Affecting Electric Vehicle Markets
Lithium is one of the most important raw materials in the production of electric batteries, which in turn is a critical component in the production of electrical vehicles. With the demand for lithium not expected to subside and new sources of lithium in limited supply, the price of the rare element is not expected to fall.
China is a dominant player in the global Lithium industry. Six of the 10 biggest electrical vehicles battery producers are based in China, with CATL, making three out of every ten batteries used in electrical vehicles globally. Chinese companies enjoy lower wages and enormous mass production advantages thanks to the size of the Chinese market. EU member states, on the other hand, may lose their position in the market if lithium shortages persist or worsen.
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Officials from Australia and China to Hold Talks
Australia and China’s foreign ministers are scheduled to meet for the first time in three years, signalling a potential thaw in relations that have in recent years turned adversarial. The meeting serves as a critical first step to opening talks between two nations of consequence in the region.
China is Australia’s largest trading partner and the biggest customer for its iron ore but relations have deteriorated in recent years. China imposed trade sanctions on Australian products in response to policies and decisions undertaken by Canberra, such as Australia’s 5G network ban on Huawei. Now, leadership in both countries seem more willing to engage bilaterally. Australian Foreign Minister Penny Wong said that it is in the interests of both countries for this relationship to be “stabilised.” Nevertheless, there are substantial hurdles both sides will need to overcome to genuinely improve relations.
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