In Geopolitics Today: Tuesday, January 17th
The European Commission Announces Net-Zero Industry Act, Saudi Leadership Hints at Curtailed Use of US Dollar for Trade, and other stories.
Russia’s Increasing Reliance on Private Military Companies
Problems within Russian army units have been demonstrated more acutely in Ukraine and are prompting Moscow to lean more heavily on private military companies (PMCs) in the fighting. Today, PMCs have become an indispensable resource of Moscow’s foreign policy, including in the Middle East and North Africa.
Despite occasional conflicts between Russia’s defence ministry and the Wagner PMC in the past, PMCs have become an integral part of Russia's foreign policy. Nevertheless, Russia’s armed forces are looking to expand in order to avoid an overreliance on PMCs. Defence Minister Sergei Shoigu announced plans to establish new formations in the troops, increase in the total number of troops and possibly raising the draft age and the upper age limit. However, funding the new reforms may prove difficult and the use of PMCs by Moscow to achieve military victories is likely to increase.
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The US between Regional Peace and Regional Stability
Policies towards Asia by the United States have been aimed at reconciling military, economic and rule-setting prowess with a desire for stability. This was achieved during a period of remarkable stability in East Asia and the Pacific, leading to the belief that US supremacy and regional tranquillity were causally related.
Yet as the United States' global power diminishes and other states gain the desire and capacity to resist US preferences, Washington’s primacy is becoming a source of regional instability, and this dynamic may lead to regional fracture and eventual war. Despite this, recent US presidents have charged themselves with propping up US hegemony in Asia, with the Biden administration continuing on this path. As a result, Washington may soon be faced with a choice between supporting regional peace or pursuing regional primacy.
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The European Commission Announces Net-Zero Industry Act
The European Commission has announced a plan to boost subsidies and tax breaks for clean-tech companies in response to the competition from the US and China. The Commission is proposing a new 'Net-Zero Industry Act' that lays out a series of clean technology goals for 2030. The clean technology goals would necessitate faster permit processes and increased subsidies for green projects.
The European Commission is currently in consultation with EU member states over how to revise the bloc's state aid rules to enable countries to support their industries against increased global competition. The EU is directly responding to the US Inflation Reduction Act (IRA), which directs about $369 billion toward clean energy and energy-security programs. Brussels fears IRA will drive investment away from Europe's industrial sector.
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Japan Reaffirms Security Ties with Group of Seven Countries
Japanese Prime Minister Kishida Fumio has visited several G-7 nations to confirm their positions on the issues to be discussed at the G-7 summit in May. During his visit to the United States, a range of issues were brought up, including Japan's overture to return to the Trans-Pacific Partnership and an agreement on space cooperation.
Kishida's government recently released key security documents that outline a change in Japan's defence posture, including the acquisition of counterstrike capabilities and an increase in defence spending. In Washington, Japan and the United States discussed concerns over China's territorial claims and the possibility of conflict. As part of their discussions, the US announced the establishment of a marine regiment in Okinawa to respond to enhance deterrence against China.
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Saudi Leadership Hints at Curtailed Use of US Dollar for Trade
Saudi Finance Minister Mohammed Al-Jadaan has announced that the kingdom is open to trading in currencies other than the US dollar in order to improve trade. He also said that there is no issue with discussing other methods of settling trade arrangements, whether in the US dollar, the euro or the Saudi Riyal.
This is the latest indication that some Middle Eastern states are moving away from the US dollar, with Saudi Arabia considering pricing oil sales to China in the yuan, Egypt announcing plans to issue bonds denominated in yuan and Israel adding the yuan and other currencies to its foreign reserves. Iran and Russia are also working on a digital coin backed by gold and have started using their own currencies for bilateral trade.