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Oil prices surged on Monday as fears of a broader war in the Middle East panicked investors. Worries about an escalation that could’ve affected oil-producing Middle Eastern countries caused a 4% rise in Brent Crude oil prices to $88 per barrel. After the heinous terrorist attacks in Israel committed by Hamas, which have thus far killed over 1,200 Israeli civilians and wounded nearly 3,000 and pushed Israel into a state of war, panic over oil prices is understandable, but not warranted.
Barring an escalation, crude oil prices will likely remain in the corridor between $80 and $90 per barrel. Prices will only surge higher if Iran, Hamas’ and Palestinian Islamic Jihad’s funder and supporter, and Hezbollah’s creator and puppet master, decides to expand the war.
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In a bold move, the US has announced sweeping tariffs on Chinese solar cells and modules, intensifying the Sino-American trade war in the renewable energy sector. Like electric vehicles, U.S. will use the full power of its trade regulatory apparatus to stymie China’s unfair competition.
This latest announcement came after a Department of Commerce probe revealed solar cells and panels produced by 4 Chinese companies underwent final processing in neighboring Southeast Asian countries to evade American tariffs on Chinese goods. The investigation has sent ripples through the US renewables market, leading the Solar Energy Industries Association (SEIA), the largest national solar trade group, to reduce its 2023 and 2024 installation projections by 46% This comes as developers like NextEra Energy Inc (NEE.N) and Southern Co (SO.N) cautioned about significant project delays.
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The world economy has mostly recovered from the COVID-19 pandemic, but nonetheless, US inflation remains well above the desired 2% threshold at an estimated 3.7% in August. Core inflation for the year 2023 is expected to be 4.3%. It is possible that the Fed would need to apply another rate hike to drive inflation down, causing a rougher landing than the Biden Administration hoped for.
Inflation and gasoline/oil prices will be key issues during the 2024 presidential election and the Republican party may attack President Biden on the shape of the economy, which could deteriorate if prices continue to rise, and the recession ticks unemployment up.
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At a recent summit in Johannesburg, South Africa, the Brazil-Russia-India-China-South Africa (BRICS) group, which some believe can counter-balance the West, for the first time in over a decade, opted to invite six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE UAE0.0%). This disparate group of emerging economies has one common feature greatly influencing their January 1st, 2024, entry into BRICS – ample energy endowments. At first glance, this seems like an assertive BRICS move towards energy dominance. The newly admitted countries would not only boost the bloc’s energy production but also greatly diversify it.
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Carl Sagan once said, “The nuclear arms race is like two sworn enemies standing waist-deep in gasoline, one with three matches, the other with five.” The near-universal recognition of the futility of an all-out nuclear war led to widespread cuts in nuclear armaments since Gorbachev’s perestroika and the Soviet collapse in 1991. Even anti-communist hawks like former President Ronald Reagan pragmatically cut nuclear arms. The US and the USSR cut strategic arsenals from over 30,000 warheads each to approximately 1550 by 2011.
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Putin’s chef and international villain par excellence, Yevgeny Prigozhin’s half-baked coup against Russia’s Vladimir Putin highlighted just how toxic Russia has become as a global business partner. While Prigozhin ostensibly failed and his power base is being purged, his failed coup revealed the fragility of the Russian state.
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The environmental costs of extracting lithium present another barrier to local lithium production which may exacerbate tensions. The mining of lithium, like other minerals, will pollute the surrounding areas, potentially contaminating the groundwater and exposing local populations to toxic chemicals. The fact that Jammu and Kashmir are the origin points for Pakistan’s primary river, the Indus River, means that Indian mining may contaminate the literal lifeline of its nuclear-armed rival, exacerbating conflict.
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Moscow’s dominant position in the nuclear supply chain grants Russia influence over the nuclear renaissance in the West, vital for the transition to low-carbon energy generation and helps fund its war machine in Ukraine. To redress these challenges, last month the United States, France, Japan, Canada, and the United Kingdom formed the Nuclear Fuel Alliance (NFA) to develop a shared supply chain for nuclear fuel. It is 23 years overdue, but better late than never.
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In the year after Russia’s 2022 reinvasion of Ukraine, freight volume more than doubled on the Middle Corridor, a transportation network connecting Asia with Europe via rail, boat and highway. In March, Secretary of State Antony Blinken unveiled a new U.S. approach to Central Asia that stressed the facilitation of the Middle Corridor, which bypasses Russia. This route removes Russia’s ability to extort its neighbors by leveraging its transit infrastructure while expanding an independent economic artery to the states of Central Asia and further to China.
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Dr. Ariel Cohen in his interview with Bloomberg Radio analyzed President Biden's trip to Asia and the reasons for its sudden cancellation, China's intensifying engagement in Central Asia and US policy to counter China in the Indo-Pacific.
Watch here.
The United States of America has been borrowing more money than it has been earning for decades. This has led to concerns about the country's ability to repay its debts and the possibility of default. In the case of the United States, default would have serious economic consequences both domestically and internationally.
Watch here.
Interstate relations are normally governed by self-interest and restraint but the ongoing war in Ukraine, when coupled with Russia’s escalatory bent, have rendered predictions about a return of political and energy stability precarious, if not impossible.
The Cipher Brief recently spoke with Ariel Cohen, director of the Energy Growth and Security Program at the International Tax and Investment Center, about the spillover of the war into a global energy crisis and what that means for 2023, when Cohen says we may experience “the toughest circumstance in Europe probably since World War II.”
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Dr. Ariel Cohen is interviewed by TRT World Now where he presents his analysis of the ongoing clashes between the Sudanese army and the paramilitary force RSF, the geopolitical dimension of the conflict and future scenarios.
Russia’s influence in Africa remains purely disruptive and predatory. The Kremlin will use Wagner as a cudgel to secure natural resources across Africa and push the U.S. out, just as they evicted France. To keep up, Washington should expand diplomatic engagement, intelligence operations, and sanctioning of all entities linked to Wagner in Africa.
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On its one-year anniversary of invading Ukraine, Russian gas sales were halved compared to before the war. Russia hoped that Xi Jinping’s visit to Moscow would allow for some relief. Xi did deliver some flowery language, stating “Right now there are changes – the likes of which we haven't seen for 100 years – and we are the ones driving these changes together” when describing relations with Russia. Xi also emphasized the importance of energy in an earlier open letter, writing that “China is ready to work with Russia to forge closer partnership in energy cooperation.”
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The OPEC+ cartel of oil-producing nations led by Saudi Arabia and Russia and chaired by Alexander Novak, Russia’s Deputy Prime Minister and Minister of Energy, is going to remove nearly 1 percent of total global oil production from the market in an apparent effort to increase prices. Despite earlier signals that OPEC+ would make no further reductions to oil production this year, the recent announcement was framed as a “precautionary measure” to ensure stability in the energy market. With oil prices surging 6.3% on Monday, to $85 a barrel for Brent, the Federal Reserve and other central bankers across the globe trying to get inflation under control, have been thrown a curveball.
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Earlier this month, Iran and Saudi Arabia agreed to restore diplomatic ties after seven years and signed a China-brokered agreement in what is being termed a breakthrough deal for the region. How does this impact and alter America’s geopolitical stature in the region? What are the first and second-tier consequences of weakening the U.S. presence and position in the Gulf in favor of Washington’s main geopolitical rival?
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Concerns over food security and dependency on Russian foodstuffs force African states to remain distant from the conflict. Now in addition to this food dependency, Russia has begun augmenting its diplomatic playbook in Africa with changes in its energy diplomacy and military power projection.
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Republican isolationists & America-firsters would do well to acquaint themselves with what is at stake. Today Russia & China, which announced a pact of “limitless friendship” three weeks before Putin invaded Ukraine, are challenging America.
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Over the last year, the West imposed sanctions on Moscow, cut back its purchases of Russian hydrocarbons, and sent military support to Ukraine. But the world’s largest democracy, and one of the United States' biggest allies in Asia, India, hasn’t done any of that. Rather, India has seized the opportunity to purchase cheap Russian energy to bolster its ailing economy. Surprisingly, US Secretary of the Treasury Janet Yellen has pointed out that “India is welcome to purchase as much oil as it wants”, as it gets Russia oil at a large discount, up to 30 percent and more.
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Historically, nations to Europe’s East and South (and the Middle East) supplied the necessary energy to the West. Over the last two decades, the European dependence on imported natural gas went up by almost 20%, from 65.7% to 83.6%. Before the war in Ukraine started, Germany imported 60% of its gas from Russia.
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The invasion in Ukraine was supposed to be long over by now – by Kremlin’s count. After the first three days, Russia’s “short victorious war” would end with a Quisling government in and a parade through Kyiv which would have cemented Russian President Vladimir Putin’s legacy and the Russian empire redux of Eastern Orthodox Slavs: Russia, Ukraine, and Belarus, or as the czarist lingo went, “the Great, Little and White Russia”.
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2022’s energy price convulsions did not start with Ukraine and Western sanctions against Russia. Another Russian neighbor, Kazakhstan, ushered in the year with protests triggered by higher fuel prices. These protests escalated into violence and rioting and sparked a brief Commonwealth Security Treaty Organization intervention, led by Russia.
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China has again taken center stage with a string of groundbreaking events that will define its policy course for years to come – both domestically and internationally. The CCP’s 20th Party Congress bequeathed Xi Jinping a historic third term as President, but extreme economic turmoil and COVID protest have resulted in a chink in his political armor.
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Europe’s winter – likely to be warmer than average – is a welcome relief for a continent that was facing existential energy supply problems a few months ago. Those problems still exist, and many Europeans are suffering due to the avoidable problems associated with overreliance on Russian gas. Thankfully, the window in which Russia could have leveraged its energy control for a favorable political resolution in Ukraine may be getting smaller. Winter is here, and Europe endures, although not without hiccups.
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