In Geopolitics Today: Wednesday, March 20th
Sudan Declares Force Majeure on South Sudan's Oil Exports, Israeli Settlers Expand Presence in West Bank, and other stories.
Sudan Declares Force Majeure on South Sudan's Oil Exports
Sudan has declared force majeure on crude oil exports from landlocked South Sudan following a major rupture in the pipeline that carries the oil to Port Sudan. The pipeline, which is the only export route for South Sudan's crude, passes through an area of active military conflict in Sudan, where a civil war has been ongoing since April 2022.
Sudan's Minister of Energy and Petroleum, Mohieldin Naim, described the rupture as a “military operations area.” Repair efforts have been hampered by the conflict, which has prevented engineers from accessing the site. South Sudan, which seceded from Sudan in 2011, relies heavily on oil exports as its primary source of government income. The country produces around 150,000 barrels per day, with the largest operations belonging to the Dar Petroleum Operating Co., a joint venture between China National Petroleum Corp. and Malaysia's Petroliam Nasional Bhd. The force majeure highlights the vulnerability of South Sudan's oil-dependent economy to the ongoing conflict in Sudan.
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China Pivots to Asian Markets as Europe and US Place Barriers
China is turning to its Asian neighbours to offset a decline in electric vehicle (EV) and lithium battery exports to Europe and the United States, as the country faces anti-subsidy probes and increased trade restrictions in these key markets. In the first two months of 2024, China's EV exports to the EU fell by nearly 20%, while exports to the US dropped by 42% compared to the same period last year.
In contrast, China's EV exports to its partners under the Regional Comprehensive Economic Partnership surged by 36% in January and February. The 15-member trade agreement aims to eliminate up to 90% of tariffs on imports between signatories over the next several years, making it easier for China to export EVs to member countries like South Korea, Indonesia, and Japan. China is also seeing a significant increase in EV exports to Central Asia, with a 2.3-fold rise in the first two months of the year. This shift in focus comes as Beijing faces concerns over its ability to meet growth goals due to overcapacity problems and trade restrictions imposed by Washington and Brussels. By bolstering exports to Asian markets, China aims to reduce excess capacity in its domestic market and maintain the stability of its EV industry.
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EU Reaches Deal with US to Launch Galileo Satellites on SpaceX Rockets
The European Union has signed off on a security agreement with the United States allowing it to pay Elon Musk's SpaceX to launch satellites for the Galileo global navigation system. The deal was necessitated by lengthy delays to Europe's next-generation Ariane 6 rocket, which forced the EU to seek alternative launch providers to maintain the Galileo constellation.
Under the agreement, EU and European Space Agency staff will have constant access to the launchpad and the right to retrieve debris in the event of a failure. The deal also stipulates that the EU can post security guards to protect its equipment. Two launches of Galileo satellites are planned for 2023, with the first scheduled for April and the second for July. The security pact is set to expire in 2027, allaying concerns that relying on SpaceX could become a long-term arrangement. The deal underscores the complex interdependencies in the global space industry and the challenges faced by Europe in maintaining its independent launch capabilities.
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Malaysia as a Key Player in Semiconductor Assembly and Testing
Malaysia is emerging as a prime destination for semiconductor companies seeking to diversify their supply chains amid rising tensions between China and the United States. The Southeast Asian nation has attracted billions of dollars in investments from industry leaders such as Intel, NVIDIA, Texas Instruments, and Infineon, with a focus on the final stages of the semiconductor production process, particularly assembly, packaging, and testing (OSAT).
Malaysia's appeal lies in its experienced workforce, well-established chip making infrastructure, strategic location, and relatively low labour costs compared to other Asian countries with strong semiconductor sectors. The country's willingness to accommodate both Western and Chinese companies has also made it an attractive neutral ground for semiconductor suppliers leaving China due to US export controls. However, the country is grappling with a severe shortage of qualified engineers, a lack of domestic semiconductor companies with global presence, and intense competition from other moderately developed economies. Additionally, Malaysia must navigate the geopolitical pressures from both the United States and China, as its neutrality may only offer temporary benefits if Washington expands trade restrictions on Beijing. Despite these obstacles, Malaysia is well-positioned to maintain its crucial role in the OSAT ecosystem.
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Infrastructure Development Goes Global
A new era of global infrastructure development is unfolding as China revamps its Belt and Road Initiative (BRI) and Western powers launch competing programs focused on projects in emerging economies. The landscape is shifting in response to Western concerns over the BRI's growing trade power, debt implications, and geopolitical influence.
China's BRI, which has loaned around $1 trillion to countries since 2013, is being rebranded to prioritize smaller, greener projects and address issues such as host country agency and company scrutiny. Meanwhile, the EU's Global Gateway and the US-led Partnership for Global Infrastructure and Investment are mobilizing hundreds of billions of dollars for high-quality infrastructure. These initiatives aim to offer developing nations an alternative choice. While questions remain about the feasibility and attractiveness of the rival schemes, the renewed focus on infrastructure development could have significant implications for economic growth, poverty reduction, and geopolitical influence in the developing world.
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Israeli Settlers Expand Presence in West Bank
Since the outbreak of the latest Israeli-Palestinian conflict in October 2023, Israeli settlers have dramatically increased their activities in the occupied West Bank, forcing over 1,200 Palestinians from their homes. Satellite imagery reveals that settlers have built at least 15 illegal outposts, 18 roads, and numerous fences and roadblocks in just four months, leading to the disintegration of 15 Palestinian communities.
The settler movement, driven by an ultra-hardline ideology seeking to populate all of Palestinian land, has historically taken advantage of periods of heightened conflict to establish themselves on the ground. The current scale and geographic spread of outpost construction suggest a bolder approach aimed at reshaping the West Bank's demographic reality and undermining the viability of a future Palestinian state. Settlers force Palestinians off their lands, often with the backing of Israeli soldiers. Despite the illegality of outposts under international law and even Israeli law, the government has long enabled their growth, with the current coalition government particularly supportive of the settlers. As Palestinian access to land continues to shrink, the long-term implications for the prospects of a Palestinian state seem dire.