Geopolitical Highlights - Week of Dec 4th, 2022.
This week sees a lot of energy/climate focus with the UN Biodiversity Conference, EU/G7 restrictions to Russian oil, and the remnants of China's zero-covid fallout.
Intro
Welcome to the first of many weekly outliners - The Gambit Outlook (TGO) - where l aim to highlight just a few of the numerous global developments occurring this week.
Now, remember, TGO isn’t attempting to encompass every single event as that would be unrealistic. Not to mention, l doubt l can write effectively, which would mean a book-worth of information about notable events each week.
(Doubt you’d even want to read all that anyway - know l wouldn’t).
That said, with each weekly outlook, l will draw attention to some of what l consider to be notable - not necessarily mainstream - events to watch and how they could play into broader dynamics, be it geopolitical, macro, or even regional.
And as always, if you have any suggestions or feedback, leave a comment to let me know what you would like to see or how TGO can improve.
Enjoy!
15th UN Biodiversity Conference (UNBC)
The UNBC attempts to focus on finalization and adoption of a post-2020 (thanks Covid) global biodiversity framework.
Coming on the heels of COP27 in November and with a much narrowed mandate.
Interestingly, the UNBC was initially set to be hosted in China - only for a set of internal protests to inconveniently distract the CCP.
Not sure what I’m referrting to? Read my first Explainer Brief on China’s protests!
Other than the framework, this UNBC emphasises:
Addressing threats to the biosphere - namely land/water/air and how preserving them is critical for life preservations.
30 by 30 - this slogan highlighting the goal of 30% being preserved by 2030.
Reaching consensus and pledges:
preventing destruction of habitats and loss of species
limiting invasive species
tackling overfishing, ocean heating and ocean acidification.
Notably, reassuring for enviornmental policymakers is that Brazil - where the lungs of the Earth (Amazon Rainforest) has seen the re-election of Luiz ‘Lula’ da Silva.
Lula has made it clear Brazil is back and will seek to act as a global steward.
This shift reflects a shift to a internationalist, cooperative approach under Lula, compared to the nationalistic, populist one of Bolsarno.
Aside from Brazil as a carbon sink, UNBC is crucial for other global south countries, namely the Democratic Repulic of Congo (DRC), which has the second largest carbon sink, and so huge role in the African continents relations to climate change.
For many less-economically developed countries, questions that many have held involve:
how do they, in their circumstances, let alone prevailing global settings, improve their efforts to decarbonize,
how to at least initiate efforts towards a smooth, effective energy transition?
A central goal to COP27 was about ‘loss and damage’ and establishing a climate fund.
(The idea being that weathier and larger-polluter countries compensating those that aren’t as wealthy, yet are being hit hardest.
Island-nations and maritime nations especially, are very conscious about the impacts to oceans due to either a displacement of species, or a complete loss of them and therefore their entire coastal commerce.
Ultimately, UNBC-15 will be important for renewing commitments to collective interests over self-interests and for unilateral (single-country) efforts to be replaced with multilateral coordination.
Note: the US - the largest cumulative emitter - isnt even a party to the UN Convention on Biological Diversity; this limiting the legitmacy of the treaty while underming the US’s ability to preach to other about climate commitments).
EU/G7 & Energy Dependency
Ironically, on the opposing end to climate change, are the sustained efforts by the EU and G7 members to decouple or at least reduce reliance on Russian oil.
This policy efforts come hot on the heels of Josef Borrell’s comments in October on the importance of Europe:
becoming independent of Russian energy,
reducing dependency on the US for security assurances/provisions,
diversifying from China as the continents primary ‘big market’.
Question remain on the extent they will or can succed, and moreover, what impacts this could mean for Russia and global economy.
There are 3 main things happening next week:
The EU is introducing a partial embargo on Russian oil,
G7 aims to place a cap on the prices paid for Russian oil to limit the profits they gain,
OPEC(+) will meet in Vienna to discuss their levels of oil production.
1. EU Embargo
The EU agreed in June to introduce a block to sea-based deliveries of Russian oil - ie via tankers, not pipelines.
This will take effect on Monday, Dec 5th.
Despite all the strong claims and pledges from across EU leaders, over 20% of seaborne-specific oil imports still come from Russia.
This reality check illustrates that while words are one thing, the actions and sheer practicality of removing any and all reliance on a certain source of energy instantously is unrealistic.
Guess you could say its a pipedream…ha - sorry l had to.
Moreover, there’s debate about the effectiveness this could have, since oil is a very fungible product.
Meaning if its not taken by one (ie, Europe) others will take it - in this case much of Asia.
Futhermore, and worse for Europe, its inevitable that opportunisitc actors could well then seek to leverage these developments.
Specifically, by reselling the rerouting of the oil back to Europe, but at an elevated price - resulting in a loss-loss.
This is something we have seen others, such as China, already do.
On the other side though, some underline that it’s not only about crude oil. But refined oil products - those produced using oil - that will be the harder hit to Russia.
2. G7 Price Cap
Similarly to above, this was pre-established in September but will go into effect on Dec 5th.
The cap will aim to be $60 per capita with the idea of trying to prevent Russia from benefiting from the Ukraine War.
Its unlikely, again, to have an immediate impact, as other countries, especially India and China, will still buy Russian oil at steep discounts.
Additionally, the Kremlin has already rejected the notion of any price cap - though it’s unclear how they plan to circumnavigate it or what they’ll do retaliatorily.
Details are still being ironed out too.
But its here where will it will matter most, as there will inveitably be some loopholes or exemptions made - as we have already seen among other sanctions programs.
OPEC(+) Consultations
These meetings are key, simply for whether the group will agree to increase collective production.
September 2002 saw them cut oil output, angering some, and the US specially - some seeing it as way to try and infleunce the US midterms.
Sentiments have shifted:
from hopes of them potentially raising production rates,
to more recent fears in the past week due to the China protests.
These fears being based on the prospect of the protests reflecting broader concerns about China’s economy slowing down, which in turn would lead to a global one.
Which, in turn, again, would decrease any inclination by OPEC to need or want to increase output.
Others have also raised the continued growing disunity in the EU over the Ukraine War and what some feel is unfair benefitting US energy firms, not to mention arms and defence industry.
Cracks have appeared - albeit not only due to Ukraine - such as with Hungary’s deepening of its energy ties with Russia and Serbia.
And it is this sustained disunity Putin seeks to exploit. In the hopes that ‘General Winter’ - deaths can exceed 200k - will be the determinant factor that tips the war in his favour.
China’s Protests
If you read my inaugural explainer brief on China’s protests, you’ll have a good idea of the context.
(If you haven’t…what are you doing? Go change that - l’ll still be here).
Essentially, these protests were notable and the biggest since 1989. But equally, the most significant test to Xi presidency since he took leadership in 2012.
Insinuations should remain cautious, but regardless, it is clear the recent events will have intensified conversations and thoughts around the political make-up, style of governance, and more.
Again this comes after Xi gained near-absolute power at the CCP Summit in October which may have added to frustration and resentment among Chinese citizens.
Now, it seems as though there are mixed actions as the CCP struggles to adjust.
The top Covid official stating that policies will continue, while other signs do suggest an easing in places is happening.
Namely, greater flexibility for people to self-isolate at home.
Over the time they have implemented zero-covid policies, the CCP has taken efforts to decentralize powers to local authorities - again with mixed results.
That said, it’s still far too early to even question Xi’s position.
The CCP is one of the most effective and entrenched regimes in the world - their level of covert operations and surveillance abilities is near-impossible to adequately describe.
At the crux of it, Xi’s decisions are meant to ensure the continuation of the CCP, which, despite having existed for 101 years, must, like any entity, nurture support for its leadership to guarantee its survival.
Especially, when a prevailing narrative is around the national rejuvenation of China after what they call their ‘century of humiliation’.
The Qatar 2022 World Cup has emerged as another headache for the CCP, with state broadcasters having to shift to showing player-only close-ups and no crowd, to avoid Chinese nationals noticing the rest of the world has largely moved on from heavily restrictive, sustained lockdowns.
Though those efforts have been frankly, quite limited in success - hence the protests.
And among all this comes the question of vaccines.
Throughout the pandemic, China has resisted importing foreign vaccines, even Russia’s Sputnik, but especially Western ones. Drivers partially out of a desire to strive for self-sufficiency, but also, arguably more so, due to national pride.
However, the more the CCP struggles to grapple with domestic, civil disobedience, this may well force their hand - be it relaxing policies or importing vaccines.
Either way, it’s near-certain there will be a flurry of conversations being held in Beijing on how to respond in the coming days.
Though l will also underline any risk to Xi’s tenability will remain low.
Indeed, its more likely that if any significant change does occur, it will via reshuffles to the uppe echelons of the CCP, to better adjust to pressures over not just covid policy, but the looming economic slowdown.
Its this slowdown that will be on minds of most CCP officials and broader global economy, given China’s disproportionate influence.
Which, perhaps, makes it, the underlying trend to watch going forward.