In Geopolitics Today: Wednesday, April 17th
Russian Peacekeepers Withdraw from Nagorno-Karabakh, Drought Triggers Energy Crisis in Ecuador and Colombia, and other stories.
Russian Peacekeepers Withdraw from Nagorno-Karabakh
Russian peacekeeping forces are being withdrawn from the disputed Nagorno-Karabakh region, where they have been stationed since the end of the 2020 war between Armenia and Azerbaijan. The Russian troops, numbering around 2,000, were deployed as part of a truce brokered by President Vladimir Putin in November 2020 to maintain security and control the Lachin corridor.
However, the peacekeepers' role became increasingly questionable as Azerbaijan blockaded the Lachin corridor and subsequently launched a successful military operation to take control of the remaining parts of Nagorno-Karabakh in September 2023. The assault led to an exodus of over 100,000 Armenians. With the region now largely emptied of its Armenian population, the Russian forces' presence appeared superfluous. The withdrawal also comes amid deteriorating relations between Armenia and Russia, with Armenian Prime Minister Nikol Pashinyan criticizing Moscow for not supporting his country against Azerbaijan.
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Australia Positioned to Lead the Global Critical Minerals Race
Australia is well-positioned to become a global leader in the critical minerals sector, thanks to its natural endowment, technical expertise, global mining footprint, and substantial mining capital base. As advanced industrialized nations seek to diversify and strengthen their critical mineral supply chains, Australia could play a key role in facilitating better international cooperation and coordination. However, a new ASPI Special Report highlights the challenges posed by the fragmented and disconnected nature of current international agreements and strategies.
The report finds that while Australia has become party to numerous agreements and processes involving critical minerals supply chains, it has not yet demonstrated how it will work to develop a global network of supply chains beyond its own production. The current Critical Minerals Strategy focuses primarily on domestic production for supplying customer nations. Effective leadership in the global critical minerals race would require a transformative critical minerals strategy to reflect commitments made, encourage overseas investment by Australian companies, and put forward domestic and international strategies for achieving global supply chain objectives.
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Poland Changes Stance on European Sky Shield Initiative
Poland's Prime Minister Donald Tusk announced that the country will join the German-led European Sky Shield Initiative (ESSI), a continent-wide effort to coordinate air defence-related purchases and procedures. This decision marks a significant policy shift under the new government, as the previous government opposed participating in the initiative due to strained relations with Berlin.
However, Polish President Andrzej Duda, who was re-elected in 2020 with the Law and Justice party's backing, expressed scepticism about the ESSI, calling it a “German business project.” Duda argued that Poland should instead focus on its existing Patriot system-based air defences, which are compatible with US forces and NATO. While the president is the supreme commander of the armed forces in Poland's political system, he lacks the political power to prevent the government from joining an international defence program.
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Europe Moving Forward with Hydrogen Production
Europe is making progress in the transition to net-zero carbon hydrogen production, with several large-scale projects moving forward under clear EU directives and regulatory regimes. While the discrepancy between announced projects and those reaching financial close remains significant, some of the most credible projects are securing financing and starting construction. Hy24, a joint venture managing the Clean Hydrogen Infrastructure Fund, has invested in projects across Europe, including Everfuel, H2 Green Steel, and Enagas Renovable. These investments have been made possible by strong state support programs.
The development of a Hydrogen network of repurposed gas pipelines and new infrastructure connecting industrial clusters in the Netherlands, Germany, and Belgium is a key support for planned projects in the Port of Rotterdam. Shell's Hydrogen Holland I and Uniper's H2Maasvlakte projects are under construction, while Air Liquide's Normand'Hy project in France has received public funding. Despite these advancements, the base of active projects in Europe is still too low to meet the EU's ambitious clean energy objectives, with Europe's inevitable need to import hydrogen becoming increasingly apparent. While the import volumes before 2030 are expected to be relatively small, the success of Germany's H2Global auctioning system and the development of bilateral export-import corridors will play a key role in determining the future of the hydrogen industry.
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Drought Triggers Energy Crisis in Ecuador and Colombia
An intense drought has forced Colombia to halt electricity exports to neighbouring Ecuador, leading to the declaration of an energy emergency in the latter country. Both nations heavily rely on hydropower plants to meet their energy needs, but the drought has reduced water levels in reservoirs used for electricity generation. Colombia's electricity operator XM estimates that the country's reservoirs are currently at just 29.8% of their capacity, prompting water rationing in areas like Bogotá.
The energy crisis has exposed the vulnerability of both countries to extreme weather patterns and highlighted the need for diversification in their energy mix. Ecuadorian President Daniel Noboa has acknowledged the critical state of the country's energy sector, announcing power outages and rationing to address the shortages. He has also initiated an investigation into potential sabotage and corruption in the energy sector, leading to the resignation of the country's energy minister. As energy consumption continues to grow in Ecuador and Colombia, their reliance on hydropower leaves them susceptible to climate-related disruptions, underscoring the need for diversifying energy sources in order to build resilience against future crises.
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US Inflation Reduction Act Lures European Solar Firms
The US Inflation Reduction Act (IRA), passed nearly two years ago, is having an impact on the global solar industry, with European firms increasingly drawn to the generous incentives and supportive policies offered in the United States. Swiss solar module maker Meyer Burger has announced plans to close its production in Germany and establish new facilities in the US, citing US financial incentives as key factors in its decision. The company's move will result in a 10% reduction in European solar panel production.
Meyer Burger's situation is not unique, as at least 10 European solar companies have reported financial difficulties, prompting calls for urgent action from the European Union to protect the industry. The dilemma facing European governments is whether to provide increased support to local firms to maintain their competitiveness, or to allow the continued inflow of cheaper imports. With China's solar sector accounting for 80% of global manufacturing capacity and producing panels at a significantly lower cost than European manufacturers, the pressure is on for Europe's energy chiefs to make swift decisions. While the EU has previously intervened, such as approving German state aid for battery producer Northvolt, the growing allure of US subsidies under the IRA presents a new challenge for Europe's clean energy ambitions.