In Geopolitics Today: Wednesday, August 31st
Gazprom Further Cuts Natural Gas Deliveries to Europe, Technological Innovation is Key in US-China Competition, and other stories.
IMF Approves $18.5 Billion Credit Line to Chile
The International Monetary Fund (IMF) has approved a two-year $18.5 billion credit line for Chile. As Chile's economy is heavily dependent on copper exports, the country is exposed to the risk that a global economic downturn posed to demand for its exports. Chile is also expected to undergo a period of political instability due to an upcoming vote on a new constitution.
As Chile faces a period of both economic uncertainty and increased social welfare demands, the government may be more willing to increase the country's debt to fund new state-owned enterprises. While Chile's debt was just 37% of the country's GDP in the first half of 2022, this figure is expected to rise with increased debt issuance. The IMF said that Chile qualified for the flexible credit line due to its “strong economic fundamentals” and “institutional policy frameworks," which combined with the country’s commitments to maintaining policies favourable to debt repayments inspire confidence in the IMF.
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Slovakia and Finland to Jointly Produce Combat Vehicles
Slovakia and Finland have announced a deal that will see the two countries jointly produce 76 armoured vehicles. The €447 million deal includes ammunition, infrastructure, and logistics, and the first shipment of vehicles is expected in September 2023.
Speaking after signing the deal, the defence ministers of both countries described the agreement as “very beneficial.” The armoured vehicles — AMVXP 8x8 from Finnish company Patria — are expected to be used in NATO-related commitments. The deal will see the first eight vehicles manufactured in Finland where Slovak workers will learn about the manufacturing process, while the remaining vehicles will be produced in Slovakia in partnership with contractor Konštrukta Defence and subcontractors.
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Gazprom Further Cuts Natural Gas Deliveries to Europe
Russia’s Gazprom has halted gas supplies via the Nord Stream 1 pipeline for three days due to maintenance, after having already reduced reduced its flows to just 20% capacity in July after an earlier cutback. At the same time, France’s Engie has said that Gazprom has notified the company of “a reduction in gas deliveries” due to a “disagreement between the parties on the application of some contracts."
Gazprom maintains that stoppages in supply are necessary for routine maintenance work but that downtime has been exacerbated by equipment delivery complications caused by sanctions. Yet the reduced supply is causing an energy crisis to worsen across the EU. The EU announcement this week that the bloc must prepare emergency measures to reduce the price of electricity by separating it from soaring natural gas prices. European Commission president Ursula von der Leyen said Brussels was working on an emergency intervention mechanism to address elevated electricity prices.
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Technological Innovation is Key in US-China Competition
In the race between the United States and China for dominance of the global technological and security commons, the recent passage of the CHIPS and Science Act in the US is an escalation that will boost the US arsenal against China and revitalize its technological security in the context of US-China competition.
The US techno-security system in the opening years of the 2020s remains stronger and more innovative than its Chinese counterpart. Yet this dominance has been steadily eroding as technological changes and the intensive pace of China’s techno-security development shift the relative power between the two largest economies. For China, the revamping of the techno-security state under Xi has seen the gap steadily close with the US. Greater military-civil fusion is expected in both economies in the years ahead as even Washington centralizes top-down coordination for emerging core technologies.