In Geopolitics Today: Wednesday, December 4th
Nepal Signs China's Belt and Road Deal, Vietnam Approves $67 Billion North-South Railway, and other stories.
Nepal Signs China's Belt and Road Deal
Nepal has signed a Belt and Road Initiative framework agreement with China, advancing Beijing's trans-Himalayan infrastructure ambitions and challenging India's regional dominance. Prime Minister Oli broke tradition by visiting Beijing before New Delhi, reflecting Nepal's push to reduce dependence on India, which controls two-thirds of its trade. The deal contains aid and technical assistance rather than pure grants, suggesting China will pursue debt financing despite Kathmandu's economic concerns.
China gains strategic depth along India's northern border through planned road and transport corridors. Yet several factors constrain Beijing's influence: Nepal's internal resistance to Chinese loans, India's entrenched cultural ties, and ruling coalition disputes over financing terms. While China frames the initiative as transforming Nepal from “landlocked” to “land-linked,” the $70 million initial funding and refusal to exempt existing loans indicates Beijing expects returns on its infrastructure investments rather than purely strategic gains.
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Hungary Seeks US Waiver to Keep Russian Gas Flowing
Hungary has requested US sanctions exemptions for Gazprombank to continue gas payments to Russia, as Budapest seeks to maintain energy supplies that cover two-thirds of its needs. The move follows US Treasury's November 21 decision to sanction Gazprombank, previously exempt, to allow European gas purchases from Russia. Hungarian Foreign Minister Peter Szijjarto announced the request while visiting Moscow for energy talks.
Hungary's actions reveal a practical reality — nations dependent on Russian energy will seek ways around sanctions. While most EU states cut ties with Moscow, Budapest maintains ministerial visits and energy deals. Turkey's parallel request for Gazprombank exemptions signals that US sanctions face resistance where they conflict with energy security. The Treasury must now balance sanctions enforcement against the risk of pushing allies toward alternative payment systems that could permanently erode US financial leverage.
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Turkey Builds Black Sea Power Through Energy and Security Deals
Turkey has emerged as a key power broker in the Black Sea amid Russia's war in Ukraine, leveraging its control of critical straits to pursue regional influence while maintaining strategic autonomy. In 2024, Ankara secured major energy deals with Western firms and established a naval security task force with Romania and Bulgaria, while simultaneously developing ties with China and managing relations with Russia. This balancing act reflects Turkey's broader strategy to transform into an energy hub between Asia and Europe while navigating conflicts in Ukraine and Gaza that threaten regional stability.
Turkey's dual-track approach combines military presence with economic expansion. The new Mine Countermeasures Task Force with Romania and Bulgaria secures shipping lanes crucial for Black Sea commerce, while major energy agreements with Shell, TotalEnergies, and ExxonMobil position Turkey as a vital transit hub. Simultaneously, Ankara courts Chinese investment through the Middle Corridor trade route and maintains energy ties with Russia. However, domestic inflation above 60% and post-earthquake reconstruction costs constrain Turkey's regional ambitions, forcing a careful balance between competing powers rather than full alignment with any bloc.
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US Bond Markets Reject Fed's Rate Cut Signals
US Treasury yields are rising despite Federal Reserve signals of rate cuts, highlighting growing market concerns about America's fiscal position. With the deficit projected to hit $2 trillion this fiscal year and national debt at $36 trillion (135% of GDP), bond markets are demanding higher yields even as the Fed eyes monetary easing. Ten-year Treasury yields have climbed back above 4.40% in November, erasing earlier declines that followed expectations of Fed rate cuts.
The divergence exposes deeper structural tensions in US financial markets. The Fed's push for easier money comes as inflation concerns persist and asset bubbles expand — American households now have 42% of financial assets in record-high stocks. Meanwhile, foreign appetite for US debt is declining relative to domestic holdings, suggesting eroding confidence in dollar dominance. While the reserve currency status has historically allowed America to sustain high deficits, markets are signalling that this privilege may have limits as fiscal and monetary policies diverge from market realities.
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Ukraine Shifts Stance on Russian-Held Territory
Ukraine is signalling a major strategic shift by floating potential diplomatic resolution for Russian-occupied territories while maintaining legal claims to sovereignty. After nearly two years of war, Zelenskyy's position has evolved from demanding complete territorial restoration to exploring frameworks that would separate de facto control from formal recognition.
Russia has reciprocated with subtle diplomatic openings, suggesting arrangements that would preserve its territorial gains without requiring Ukrainian recognition of annexations. This emerging framework mirrors other frozen conflicts and could allow both sides to claim partial victories — Russia maintaining physical control while Ukraine preserves legal claims. The development reflects a broader regional realignment as military losses and economic strains push Russia and Ukraine toward more pragmatic positions, though significant obstacles to any settlement remain.
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Vietnam Approves $67 Billion North-South Railway
Vietnam approved a $67 billion high-speed railway connecting Hanoi and Ho Chi Minh City, with construction set to begin in 2027. The 1,541-kilometre line will reduce travel time between Vietnam's largest cities from 30 hours to just over five hours, with trains running at speeds up to 350 kilometres per hour. The project marks a significant milestone for Vietnam's development — its GDP has tripled since 2010 when parliament previously rejected the plan as too expensive.
The Communist Party of Vietnam has given the project strong political backing, emphasizing domestic funding and technology control while leaving room for international partnerships. The railway, planned to open by 2035 on the 60th anniversary of Vietnam's reunification, faces substantial engineering challenges, with 60 per cent of the track requiring bridges and 10 per cent tunnels. Early projections suggest the line will operate at a loss for its first four years, requiring $500 million annually in government subsidies, highlighting the long-term nature of the investment in Vietnam's infrastructure modernization.