In Geopolitics Today: Tuesday, January 30th
NATO Allies Clear Bureaucracy to Expedite Arms Flows, Saudi Arabia Scraps Oil Expansion as Peak Demand Risks Loom, and other stories.
NATO Allies Clear Bureaucracy to Expedite Arms Flows
The defence ministers of the Netherlands, Germany, and Poland have signed a deal that will cut bureaucratic obstacles that could hinder swift cross-border movement of NATO troops and weapons. The pact focuses on easing regulations along a corridor stretching from Dutch North Sea ports via Germany towards NATO’s eastern front.
The agreement appears to lay vital logistical groundwork enabling weapons transfers from the US and other NATO members to flow to Ukraine through NATO territory. Bureaucratic hurdles have now been lowered between the Netherlands' shipyards, Germany’s transit infrastructure, and Poland's frontier staging areas. While more countries may need to ease mobility rules, progress lowering bureaucratic friction along this pathway signals preparation by core allies to accelerate solidarity shipments to Ukraine using a proven logistics vector. As Ukraine drains current equipment stockpiles, this corridor may soon hum with fresh armoured vehicles, air defence systems and other reinforcements from allies rushing to replenish frontline units.
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Vietnam, Philippines Align to Counter China's Maritime Claims
Vietnam and the Philippines signed two agreements on Tuesday aimed at managing tensions and preventing incidents in the disputed South China Sea. The deals, inked during Philippine President Ferdinand Marcos Jr.'s visit to Hanoi, will see the two countries' coastguards cooperating more closely in the strategic waterway.
The pact comes as both Vietnam and the Philippines have expressed growing concern over China's expansive claims and military drills in the South China Sea. The agreement could pave the way for Hanoi and Manila to align their competing maritime claims. It also builds on efforts by the two Southeast Asian nations, which describe themselves as strategic partners, to boost trade ties — including a new five-year rice deal. More broadly, the coastguard cooperation signifies smaller regional countries banding together to balance against China's maximalist claims on the South China Sea.
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US LNG Project Pauses Raise Supply Security Fears
The United States has paused approval of several key liquefied natural gas export projects, including Venture Global's major Louisiana production facility. The move has sparked alarm among European officials reliant on growing US capacity to displace Russian gas flows to Europe.
By challenging project permits, Washington risks undercutting Europe’s fragile unity. Each delayed approval eats away at planned export volumes needed to deter European countries, some of which are desperate to reopen Gazprom pipelines. With Germany very import-dependent, Berlin may calculate that wavering US commitment to boosting LNG output are grounds to re-engage Moscow. That would critically impede US leverage against Russia in any settlement concerning Ukraine. Washington's shielding of its European allies against political pressure spurred by rising natural gas prices remains an essential component to forestalling European acquiescence to Russian demands.
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Saudi Arabia Scraps Oil Expansion as Peak Demand Risks Loom
Saudi Arabia has abruptly reversed its production growth plans, ordering state energy firm Saudi Aramco to abandon plans to expand oil production capacity by a million barrels per day (bpd) to 13 million. Instead, output will remain capped at 12 million bpd for the foreseeable future, abandoning 2020 pledges to pump up to 13 million that aimed at retaining Saudi's role as swing producer.
The surprise scrapping of new mega-projects like the Safaniya development indicates the kingdom sees waning long-term demand growth unable to justify major new investments. That may compel Aramco to curb spending plans further, instead redirecting capital towards gas, renewables and the kingdom's broader economic diversification efforts. Riyadh retains the flexibility to unleash its spare production capacity if conditions warrant, the pivot away from pumping full-tilt likely reflects evolving assessments that peak oil demand risks are heightening faster than expected. With the EU and others accelerating clean energy transitions, Saudi is shelving projects predicated on boundless consumption growth rather than stranding assets.
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Turkey Quietly Cuts Sanctioned Russia Exports
Trade statistics reveal Turkey sharply cut exports of restricted dual-use products to Russia by over 30% in November 2022, likely bowing to repeated pressure from the United States and NATO allies. The data shows sanctions-listed items like electronics, semiconductors, and optics plunged despite booming overall trade, as a top Treasury envoy pushed Turkey to stem flows that could aid Russia's war effort. Ankara has trod a fine line on openly confronting Moscow.
But through opaque manoeuvres, Turkey now appears to be appeasing Western demands for economic isolation of Russia. Turkish officials proclaim neutrality while quietly enforcing allies' red lines on military supply access. Still, glaring loopholes persist, with sanctioned Turkish goods likely to be rerouted through third countries to reach Russia regardless. And an upcoming Putin visit for talks on Ukraine shows Ankara's delicate balancing act continues. While the export slump's durability remains uncertain given Turkey's heavy Russian energy dependence, November marked an overdue down payment by Erdoğan to his NATO partners on closing an important sanctions gap.
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Gaza War Batters Economies of Egypt, Lebanon, and Jordan
The war between Israel and Hamas continues to batter the economies of Egypt, Jordan and Lebanon, costing billions in lost tourism revenue, trade, and jobs. While IMF loans provide short-term relief, they also impose belt-tightening that could worsen poverty and unrest. Approving further financing may require more austerity and currency devaluation.
Egypt and Jordan are working to restore pillars of their economies once conditions improve. Egypt is investing in tourism megaprojects and expanded Suez Canal capacity for future growth. Jordan likewise faces blowback from boycotts and strikes at Western firms it hosts. While both Egypt and Jordan tread carefully to avoid stoking regional war, economic aftershocks at home persist. Lebanon faces the dimmest prospects, lacking external financial partners as border tensions threaten spillover. Empty coffers preclude rebuilding southern villages post-Israeli strikes. No respite seems imminent: with Hezbollah and Israel still sparring nearby, the optimism needed to unlock foreign investment looks remote.