In Geopolitics Today: Thursday, March 7th
Oman Adopts a More Assertive Diplomatic Stance, Turkey and Somalia Sign Energy Exploration Deal, and other stories.
Oman Adopts a More Assertive Diplomatic Stance
Oman, traditionally known for its quiet diplomacy, has taken an unusually bold and public approach in response to the unfolding crisis in Gaza. The country's Foreign Minister Sayyid Badr Albusaidi has called for an “emergency international conference” to agree on arrangements for Palestinian statehood. Oman's shift towards a more assertive diplomatic tone is driven by a combination of domestic and regional factors. By adopting a more visible and assertive approach, Oman could leverage its unique position to promote dialogue, engagement, and mutual understanding among the various stakeholders.
Internally, there are clear signs of growing among the Omani population about the situation in Gaza. Public displays of support for the Palestinian cause is highly unusual in Oman, indicating a palpable shift in public opinion. Moreover, Oman's Grand Mufti, Sheikh Ahmad bin Hamad Al-Khalili, has been increasingly vocal in denouncing the Israeli occupation, suggesting growing domestic pressure on the government to take a stronger stance. Regionally, Oman's primary concern is the maintenance of stability, as any escalation of the conflict would directly undermine its long-standing efforts to maintain trade flows and de-escalate tensions. With its reputation as a pragmatic peacemaker and its extensive networks of influence, Oman has a vested interest in preventing regional security from deteriorating further. As the situation in Gaza threatens to destabilize the broader Middle East, Oman may feel compelled to step up its diplomatic efforts and bring its role as an interlocutor state to the forefront.
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ExxonMobil Files for Arbitration Over Hess's Guyana Assets
ExxonMobil has filed for arbitration with the International Chamber of Commerce in Paris to assert its right of first refusal over Hess Corp.'s stake in the Stabroek Block offshore Guyana, potentially complicating Chevron's acquisition of Hess. The move highlights the immense value placed on the Stabroek Block, where the Exxon-led consortium, including Hess and China's CNOOC, has made over 30 significant oil discoveries totalling an estimated 11 billion barrels of oil since 2015.
ExxonMobil argues that its right to pre-empt the sale of Hess's 30% stake in the Stabroek project is embedded in the joint operating agreement among the consortium members. The energy giant contends that it shouldered significant risks and costs in making the initial discovery and has a responsibility to shareholders to ensure it is adequately rewarded. Chevron and Hess maintain that the right of first refusal does not apply in this case, but they acknowledge that if an arbitration process finds otherwise, the $6.6 billion deal may not close. The dispute threatens to derail Chevron's largest acquisition in its history, with access to Guyana's offshore oil resources being a key rationale for the transaction. The exact nature of the dispute remains unclear, as the joint operating agreement has not been made public.
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India Pushes Rupee Payments for Gulf Oil Imports
The Reserve Bank of India (RBI) has urged the country's major state-owned refiners to negotiate with Persian Gulf oil suppliers to accept at least 10% of payments in rupees starting next financial year. The move aims to promote the use of the Indian currency in international trade and reduce dependence on the US dollar. The RBI's concern stems from the potential weakening of the rupee due to India's growing energy demand, which has been a general trend over the past two years.
However, the Gulf oil exporters have shown initial resistance to the proposal, citing currency risks and conversion charges. The refiners, including Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp., are also hesitant to bear the additional costs associated with currency transactions, fearing it could erode their margins. This push for rupee payments aligns with broader efforts by the BRICS nations (Brazil, Russia, India, China, and South Africa) to reduce their reliance on the US dollar in international settlements. The group is working on creating a blockchain-based payment system for international transactions, aiming to make it convenient, cost-effective, and free from political influence. As the world's third-largest crude importer and a key driver of global consumption growth, India seeks to leverage its increasing energy demand to promote its own currency and gain a stronger foothold in the international monetary system.
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Turkey and Somalia Sign Energy Exploration Deal
Turkey and Somalia have signed an energy exploration and drilling deal targeting hydrocarbon reserves in Somalia's exclusive economic zone, further bolstering bilateral relations following a comprehensive naval defence agreement last month. The deal, signed by Turkish Energy Minister Alparslan Bayraktar and Somali Petroleum and Mineral Resources Minister Abdirizak Omar Mohamed in Istanbul, also includes land exploration.
The agreement comes amid heightened regional tensions, with Ethiopia recently signing a deal granting it access to ports along the coast of Somaliland, a breakaway region seeking independence, in exchange for recognition. In response, Turkey and Somalia have concluded a naval defence pact mandating Turkey to protect Somali sea waters against threats for the next decade, while also empowering Turkey to develop Somalia's maritime resources. Somalia may possess at least 30 billion barrels of oil and gas reserves, but significant investment and time are required for development. The Turkey-Somalia deal is expected to involve extensive efforts from Turkey, which has experience in offshore energy exploration since discovering gas in the Black Sea in 2020.
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France and Moldova Sign Defence and Economic Agreements
France and Moldova have signed bilateral defence and economic cooperation agreements. The deals come a week after Moldova's breakaway pro-Russia region of Transnistria appealed for Moscow's help, echoing separatists in Ukraine's eastern Donbas region at the outset of the 2014 conflict. The war in Ukraine has severely impacted Moldova. Moldova's pro-western government has distanced from Moscow, leading to the country being granted EU candidate status alongside Ukraine in June 2022.
The defence accord includes placing a French military representative in Moldova to coordinate training programs and arms supplies. France has also pledged to invest in Moldovan energy projects, natural resources, and rail transport to bolster the country's economic independence from Russia. Moldova's ability to boost its military is still constrained by limited financial resources, but it has taken steps to increase its defence budget and acquire equipment from France. The situation in Transnistria, where Russia maintains a military base with around 1,300 soldiers, serves as a reminder of the potential consequences of a complete Russia victory in Ukraine. However, Russian forces would only be able to take control of Transnistria if they occupied the Ukrainian port of Odesa and surrounding territory.
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The Emerging Russia-Iran-Turkey Axis in the Caucasus
A recent policy brief by the Clingendael Institute highlights the growing strategic partnership between Russia, Iran, and Turkey, aimed at creating a new economic order in the Caucasus region and countering Western influence. The ongoing conflicts in Syria, Ukraine, and Gaza have facilitated closer collaboration among the three states, with a focus on bypassing Western regulatory frameworks and establishing independent monetary systems and energy markets.
The brief argues that the Caucasus has become a crucial link in a “value chain” forged by Russia and Iran to circumvent sanctions. Russia's diminished ability to project strategic influence in the region has created opportunities for stronger economic partnerships with Iran and Turkey, both of which seek to keep Western economic influence in check. For Iran, this partnership offers a chance to break its isolation by leveraging its geography to facilitate Russia's land-based economic pivot to the Middle East and the Indian subcontinent, bypassing the Persian Gulf and the Suez Canal. However, the path to reshaping the Caucasus is not without challenges.