In Geopolitics Today: Wednesday, April 5th
Mexico to Purchase 13 Power Plants from Spanish Energy Company, TotalEnergies signs $25 billion deal for energy project in Iraq, and other stories.
Mexico to Purchase 13 Power Plants from Spanish Energy Company
Mexico has taken a major step towards returning control of its electricity market to government hands with a $6 billion deal to purchase 13 power plants currently operated by Iberdrola. This move has been part of President Andres Manuel Lopez Obrador's plan to reverse policies introduced by the previous government. However, this decision has led to growing tensions with the United States, which has repeatedly warned Mexico to open up its market instead of closing it to private businesses.
The Mexican energy sector is currently roiled by an environment of uncertainty and regulatory brakes to execute new and ongoing investments. The power plant deal is expected to be finalized in five months, and international law firm White & Case has warned that electricity and mining are among the most vulnerable industries to stronger government control. As a result, some companies have decided to reduce their exposure to the Mexican market. Increased pressure from Washington is likely to follow as Obrador remains committed to nationalizing strategic sectors of Mexico’s economy.
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Israel Concerned over Détente Between Saudi Arabia and Iran
Recent diplomatic developments have caused concern for Israeli officials, particularly the Chinese-brokered agreement between Saudi Arabia and Iran. While shared threat perceptions of Tehran have brought Saudi Arabia and Israel closer together in the past, the potential for Riyadh to resume diplomatic relations with Iran and invest in the Iranian economy is seen as a major setback for Israel's strategic interests. This has prompted anxiety among Israeli officials who fear that a potential military strike against Iran would be more difficult to conduct without access to Saudi airspace or military facilities.
Despite these concerns, Saudi Arabia's fundamental threat perceptions of Iran are unlikely to change, and the Kingdom will continue to view Israel as a potential ally in countering Iranian influence in the region. While Riyadh may pursue covert cooperation with Israel, the Saudis are also cautious about antagonizing Iran and will likely maintain diplomatic relations with Tehran during any period of détente. As Saudi Arabia and Iran navigate their complex relationship, it will be important to monitor how their divergent approaches to dealing with the perceived Iranian threat impact their cooperation with other regional players. The future of Israel's relationship with Saudi Arabia remains uncertain, but the recent diplomatic agreement with Iran is a reminder that geopolitical dynamics in the Middle East can shift quickly and unpredictably.
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Middle Powers Rise as Key Players in Global Politics
The world is facing new risks beyond Russian and Chinese agitation, as middle powers become more assertive and seek a larger voice in world politics. Middle powers are nations that have significant influence and strategic importance but are not strong enough to count as “great” powers. Some are fully developed, former colonial powers like Germany and Japan, while others are large developing states such as Brazil, India, Indonesia, South Africa, Turkey, and Vietnam.
These countries are increasingly seeking more control over the shape of the global order and greater influence over specific outcomes. This trend is amplifying the uncertainty and the clashes of regional ambitions in world politics, and molding a significant geopolitical space between the great powers. As a result, international stability and the outcome of great-power rivalries will in part be a product of the behaviour of middle powers. The rising activism of middle powers can theoretically contribute to stability by providing additional sources of balancing and diplomacy. But an equally likely outcome is that the ambitions of these countries will exacerbate other rising instabilities of the international system.
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TotalEnergies Signs $25 Billion Deal for Energy Project in Iraq
French energy giant TotalEnergies has signed a $25 billion deal with the Iraqi government and QatarEnergy for the development of the Gas Growth Integrated Project (GGIP). The project aims to improve Iraq’s electricity supply and develop its natural resources. As part of the deal, TotalEnergies will invest $10 billion over the next decade to recover flared gas in three oil fields in southern Iraq to supply power-generation plants. The company will also develop a one-gigawatt solar power plant to supply electricity to the Basrah regional grid.
The Iraqi government will hold a 30% stake in the project through its southern subsidiary Basrah Oil Company (BOC). QatarEnergy will have a 25% stake, while TotalEnergies will have a 45% share. The development also includes building a seawater treatment plant to provide water to increase regional oil production. OPEC's second-largest producer, Iraq aims to increase its oil production after output stagnated in recent years due to the scaling down of operations by BP, ExxonMobil, and Shell. However, on Sunday, OPEC+ announced that it would cut oil production by an additional 1.16 million barrels a day, with Iraq pledging to cut output by 211,000 bpd.
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New Cable Projects Seek to Bypass Egypt as Internet Choke-Point
The internet relies on underwater fibre-optic cables that connect countries around the world. Egypt has long played a critical role in connecting countries via an underwater fibre-optic cables network, with up to 30% of global internet traffic passing through the country. However, the lack of alternative routes in this strategically important region has made Egypt a choke-point, allowing state-owned Telecom Egypt to charge fees that are significantly higher than other companies.
To address this issue, new cable projects are being developed that bypass Egypt, including Google's Blue-Raman project, which connects Europe to Saudi Arabia via Israel and Jordan. Saudi Arabia is investing heavily to become the digital hub of the Middle East, with a $1 billion investment in the MENA Hub and the development of the Saudi Vision Cable. The country is also launching six new subsea cables in the next three years, including the Raman and SVC cables. These initiatives are part of the kingdom's Vision 2030 strategy, which aims to diversify the economy and attract global tech companies. The fibre-optic map of the Middle East is being redrawn, with powerful regional and global actors leading the way.