In Geopolitics Today: Tuesday, November 21st
China and Saudi Arabia Expand Economic Ties Through Currency Swap, Azerbaijan Boycotts US-Led Peace Talks, and other stories.
China and Saudi Arabia Expand Economic Ties Through Currency Swap
China and Saudi Arabia signed a 50 billion yuan currency swap agreement as they deepen economic ties. The 3-year deal allows easier trade in local currencies, reducing risks and financing costs. This supports Saudi Vision 2030 diversification plans and China's internationalization of the yuan. It also facilitates Saudi oil sales to China, the kingdom's largest energy customer. The pact marks China's 30th swap line as it promotes global yuan adoption.
The deal demonstrates growing financial integration between China and Saudi Arabia beyond energy. For China, it advances its geoeconomic strategy and reduces dollar dependence. For Saudi Arabia, it eases the burdens of an economic shift away from hydrocarbons. Over time, widened usage of the yuan could increase China's sway in the kingdom. But Saudi likely also seeks to balance relations and hedge risks. As dollar strength strains emerging markets, the practical benefits for both sides make currency collaboration appealing.
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India and China Critique EU's Carbon Border Tax
India and China continue to criticize the EU's proposed carbon border tax, which adds costs based on emissions levels. China called it a barrier to trade, while India said the plan was “ill-conceived.” Both argue it ignores different development stages and hurts their exports. However, China told major emitters to improve reporting as a way to prepare. India mulls a domestic tax to offset the EU tax and fund its energy transition.
The carbon tax exposes divides over equitable climate action and threats of green protectionism. For the EU, it spurs emission cuts while avoiding competitiveness impacts on its firms. But for emerging giants focused on growth, new costs seem unfair. Retaliation risks loom while cooperation remains elusive. As climate pressures grow, clashes over offsetting mitigation burdens will rise. Creative solutions reconciling industrial transitions with global integration are essential to avoid damaging blows to either climate or economic progress.
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Ukraine Seeks Arms Industry Expansion
Ukraine is pushing to grow its arms industry, wooing Western defence firms to open factories as future Western arms supplies may dwindle. It signed a deal for German firm Rheinmetall to start tank repairs, later aiming for tank production. Ukraine wants arms manufacturing to be a key economic sector and strategic asset.
Ukraine's drive for arms self-sufficiency has economic and security motives amid uncertainty ahead. Boosting production capabilities could aid its military and economy. But realizing ambitious aims requires substantial Western tech transfers, investment, and training. While the war generated arms demand and Ukraine has skilled engineers, building advanced industries remains challenging. With global arms sales flat, competition is intense as well. However, even modest gains in niche areas would be significant for Ukraine's defence.
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Azerbaijan Boycotts US-Led Peace Talks
Azerbaijan has refused to attend upcoming peace talks with Armenia hosted by the United States, citing bias in Washington's approach. This followed a Congressional hearing affirming support for Armenia and probing abuses in Nagorno-Karabakh. Baku condemned the hearing and a proposed military aid suspension.
Azerbaijan's defiance highlights tensions in US mediation, which it sees as favouring Armenia. Its engagement preference for Russia and Turkey reveals distrust in Western brokers. But unconditional regional backing risks enabling unchecked force over diplomacy. With talks stalled, chances for renewed clashes spike. Trust-building on all sides is essential for progress. But neither seems ready for concessions, jeopardizing the US role and chances for durable peace.
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Russia's Pursuit of AI in Modernizing Military Faces Hurdles
Russia is actively pursuing AI and emerging technologies to modernize its armed forces. It aims to harness civilian sector progress through a state-driven model. Key priorities include command systems, unmanned vehicles, weapons guidance, and electronic warfare. But Russia lags leading powers due to economic troubles, brain drain, and structural weaknesses.
Russia's AI aspirations aim to rapidly gain advantages and offset conventional capability gaps. Though sanctions impact high-tech access, smuggling and workarounds have enabled some progress. But grand visions obscure real progress to date. Verifying capabilities is difficult amid ambiguous rhetoric and secrecy. Still, battlefield pressures may accelerate niche applications. Much depends on tackling systemic flaws in sector governance and human capital. While Russia is doubling defence spending, efficiently absorbing funds amid war will prove challenging. AI offers Moscow hope for reinventing military power, but the road ahead remains arduous.
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US Leveraging Ukraine to Reshape Black Sea Geopolitics
US officials see the Ukraine war as achieving key objectives in the energy-rich Black Sea region. They envision weakening Russia while transforming the area into an EU market, with new pipelines from Central Asia reducing dependence on Russia. Officials openly state geopolitical aims, including increased NATO presence, through claims that it reinforces Ukraine's defences.
The statements expose a calculus of using Ukraine to reshape regional geopolitics and energy flows for US advantage. Tangible outcomes sought go beyond Ukraine's borders or immediate security needs. While officials praise Ukraine's courage, the human costs seem secondary to wider ambitions. How this gap between US strategic interests and Ukrainians' sacrifice affects sustainability remains uncertain. But instrumentalization of the conflict for American goals risks undermining the justice of Ukraine's cause in public perceptions.