In Geopolitics Today: Tuesday, July 5th
Turkey and Italy to Deepen Defence and Energy Cooperation, Ethiopia and Sudan Agree to Settle Border Dispute, and other stories.
Turkey and Italy to Deepen Defence and Energy Cooperation
Turkey and Italy have agreed to enhance bilateral economic cooperation, particularly in defence and energy. Turkish President Recep Tayyip Erdogan met with Italian Prime Minister Mario Draghi in Ankara, where the two signed a total of nine new bilateral cooperation agreements.
Turkey and Italy are two regional powers that often share common interests and values in the Mediterranean basin, with Turkish-Italian bilateral relations having developed into a strategic partnership in recent years. The Turkish defence industry has become one of the important players in the international defence market, and the advanced military capabilities produced by Turkish defence firms are an attractive asset to Italy, which recently scrapped its own domestic drone program. The two leaders also expressed an interested in moving forward with a joint air-defence missile project between France, Italy and Turkey, blocked by France in 2019 after Turkey launched a military operation in northern Syria.
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China to Invest $3 Billion in Indonesian Sovereign Wealth Fund
China’s investment group Silk Road Fund (SRF) has agreed to invest up to $3 billion in Indonesia's sovereign wealth fund. Indonesia founded the Indonesia Investment Authority in February 2021 as a means of attracting foreign investment, and it has since managed to secure a $10 billion pledge from the United Arab Emirates. The investment made by SRF will allow Chinese companies to more freely move capital to Indonesia, spurring economic ties between the two in the process.
Unlike many other sovereign wealth funds, the Indonesia Investment Authority seeks to attract foreign co-investors to help fund economic development via state-supported initiatives. China's increased access to investment opportunities in Indonesia coupled with Indonesia's growing economy will work to incentivize Chinese businesses to invest money in Indonesia. This will work to bolster bilateral and business ties, which will strengthen Beijing's influence in Indonesia going forward. Nevertheless, Indonesia is likely to seek other sources of investment as well, and Jakarta has said that wealth funds from the United States and Japan have already expressed an interest in making investments in Indonesia.
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Ethiopia and Sudan Agree to Settle Border Dispute
In a sudden turnaround from an increase in violence in a disputed border region between Sudan and Ethiopia, leaders from the two countries have come together and agreed upon peacefully settling the al-Fashaqa border dispute. Ethiopia’s Prime Minister Abiy Ahmed met with Sudan’s military leader, General Abdel Fattah al-Burhan, in Kenya’s capital Nairobi after armed clashes between their militaries threatened to escalate.
The talks between the two leaders follow fighting in a volatile border region in which Sudan said that Ethiopian forces captured and killed Sudanese troops. Meeting on the side-lines of the Intergovernmental Authority on Development forum, the two leaders made a commitment for dialogue and a “peaceful resolution to outstanding issues.” Tension over al-Fashaqa have escalated in recent years alongside a diplomatic spat over Ethiopia’s construction of a hydropower dam. A diplomatic solution to the dispute over al-Fashaqa may help the two countries also work out a solution on the issue of the Grand Ethiopian Renaissance Dam.
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War in Ukraine Imperils Eurasian Economic Land Corridors
Three interrelated and intersecting trends have emerged in Eurasian geo-economics as a consequence of Russian invasion of Ukraine and the subsequent sanctions imposed on Moscow. The war has put into question many international infrastructure investment plans across Eurasia, with alternative routes emerging that could see Iran play a central role in linking the economies of Asia with the Middle East and Europe.
The war in Ukraine has disrupted the planned New Eurasian Land Bridge (NELB), a rail infrastructure network that was intended to be China’s way of developing the ancient Silk Road into a modern overland trade network via its Belt and Road Initiative. As a result, economies in Central and South Asia are increasingly considering Iran as a viable alternative route for linking Asia to Europe and the Middle East. Russia’s isolation from Europe is shifting the Russian economy increasingly eastward as Moscow looks to mitigate the effects of sanctions by diversifying its trade away from NATO economies. This may lead to intensified efforts at developing the International North-South Transport Corridor, which traverses the Caucuses to connect Russia to the Iranian port of Bandar Abbas on the Strait of Hormuz.
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