Energy, (Geo)Politics & Money - 2024.02.19
Non-partisan, objective & neutral analysis where global developments in energy, business & geopolitics intersect & curated from leading global sources & resources.
Welcome to EPM, where we take our daily look at the interconnected worlds of Energy, (Geo)Politics and Money. Curated from the world’s leading sources of information, we provide you both the information and the objective, neutral commentary that you need to make sense of it all – and beat the market.
In this roundup, we focus on Geopolitics and examine:
The Israel’s War on Gaza where EPM continues to see signs confirming our forecast from earlier this week, namely that the war turned with US pressure on Israel now significantly higher, negotiations are taking place in Cairo, and developments on the ground indicate an agreement is within reach.
Russia’s capture of the city of Avdiivka, in eastern Ukraine; where EPM explains why, contrary to assertions by most famous analysts, this is an important development that opens the way to further Russian victories in the Donetsk region, and what this most likely means for the war in 2024
The meeting between Chinese Foreign Minister Wang Yi and US Secretary of State Antony Blinken at the Munich Security Conference; which in the EPM view does not indicate more closeness between the two, but rather a shared view that a worsening of relations would be detrimental to both
Geopolitics
The War in Gaza
As the Israel’s War on Gaza, EPM continues to see signs that confirm our forecast from earlier this week, namely that the war has taken a turn with US pressure significantly higher on Israel, negotiations taking place in Cairo, and developments on the ground indicate an agreement is within reach.
The most important indication is the construction work taking place on the Egyptian side of its border with Gaza. A large patch of land there is being bulldozed, and walled off by a fence, writes The New York Times. Egypt refuses to comment on the works, but it seems clear it is preparing for what the New York Times calls a “spillover” of Gazans into Egyptian territory. More than 100,000 people could be accommodated in the camp, writes the Washington Post, and a large numbers of tents, as yet unassembled, have already been delivered to the site.
EPM notes this would mark another victory for Israel in defiance of the US vision for Palestine. Israel proposed a relocation of Gazans out of Gaza at the start of its offensive, which at that time the US, Egypt and all other US allies in the region spoke out against as “not an option on the table”. It seems to EPM that the US is now allowing for this forced expulsion of Gazans – according to the UN, certainly a crime against humanity and an indicator of genocidal intent, and possibly even an act of genocide (see the UN Convention on the Prevention and Punishment of the Crime of Genocide Article II) – in order to get Israel to agree to a deal. As such, in EPM’s view this action is certain to cause an outcry among the general public around the world, which BBC discusses in its assessment of the situation, and will result in further deterioration of the US’ reputation and standing in the world, and weaken its soft power (influence to get things done behind the scenes).
In EPM’s view, the US is solely responsible for this. It has all the leverage needed to achieve different outcomes, but it continues to choose not to use this leverage. This assessment is confirmed by the news that the Biden administration is getting ready for another emergency shipment of bombs and other weapons to Israel, even though it is trying to get Israel to accept the US proposed peace proposals. The proposed arms delivery includes roughly a thousand each of MK-82 bombs, KMU-572 Joint Direct Attack Munitions that add precision guidance to bombs, and FMU-139 bomb fuses, writes the Washington Post. Clearly, this makes a mockery of US President Biden’s strong words against Israel. It makes him look foolish. As does the assessment of the sale by his own officials at the US embassy in Jerusalem, which says that there are no potential human rights concerns with the sale. “Israel takes effective action to prevent gross violations of human rights and to hold security forces responsible that violate those rights”.
The War in Ukraine
As to the Ukraine War, Ukraine’s military chief Oleksandr Syrskyi said early on Saturday that he’s withdrawing troops from the city of Avdiivka in eastern Ukraine, writes the South China Morning Post. The Ukrainian commander said he had made the decision to avoid encirclement and “preserve the lives and health of servicemen.” Russia has been trying to capture the city since last October, which lies in the northern suburbs of Donetsk city. The strategically important location can now serve as a possible springboard for Russia to drive deeper into the Donbas region. The Institute for the Study of War, a Washington think tank, disagrees, saying the victory is “operationally (in)significant” and offers the Kremlin only “political victories”. EPM disagrees. Downplaying a victory because it took a long time to achieve we believe is either misunderstanding or deliberate misrepresentation of the situation. We note that the Russian victory in Avdiivka closely resembles its victory in Bakhmut, which also resulted from a slow but steady chipping away at Ukrainian defenses (hello, modern war of attrition).
Avdiivka, similar to Bakhmut, was an exceptionally well-fortified forward Ukrainian position. Below Bakhmut is a network of tunnels and caves, while the defenders of Avdiivka benefited from a fortress like coke and chemical plant in the city. Both sides incurred heavy losses - manpower and equipment - when fighting in such environments, but it is clear now that Russia is much more capable of (and willing to) absorbing such losses. Specifically as to Avdiivka, not only does the Russian victory here relieve Ukrainian pressure on Donetsk, which for the Russians is a key area of their supply chain. As reported by the Washington Post, the loss of Avdiivka severely damages Ukraine’s ability to supply its front lines in the Donbas region. Beyond the strategic benefits achieved by Russia, EPM’s view is that the loss at Avdiivka indicates the momentum clearly favours Russia.
As to what you should expect regarding the War in Ukraine going forward, we note, again, that this war is not of the “Blitzkrieg” type but rather the old-school, artillery heavy, trench warfare type. In a “War of Attrition”, one should not expect to see quick victories, as in a penetrating run toward Kiev or Moscow. Rather, as each side digs in, they try to put the other under as much pressure as possible, and absorb as much pain as possible in the process. In other words, one should expect the war to end as a result of the front line collapsing under the immense pressure brought to bear on the other side. After the collapse, peace negotiations will be called for quickly and will not favour the party who’s front line collapsed. In fact, if the ‘victor’ has sufficient reserves, they may return to a “Blitzkrieg” type of offensive to capture as much land as possible so to ensure all their demands are met at the peace talks in exchange for returning territory to the vanquished.
EPM sees no way in which the western alliance can support Ukraine to prevent it from becoming the first to collapse under the current pressure, except vertical escalation through formally bringing NATO forces to the front lines. We hope it does not come to that, as it would in our view trigger World War 3, as we would expect China to respond in kind to such a development by providing active support to Russia. Barring such a worst case scenario, therefore, we expect Ukraine to have to request negotiations with Russia sometime in 2024.
US - China Relations
As to the US – China competition that, in the EPM view, underlies most events in the world of geopolitics, Chinese Foreign Minister Wang Yi and US Secretary of State Antony Blinken met at the Munich Security Conference on Friday, writes the South China Morning Post. Surprisingly, Ian Bremmer, president of the Eurasia Group consultancy, had in the view of EPM the best analysis of the meeting: “Both countries are trying to manage the relationship more effectively than they have before precisely because they want to avoid ‘lose-lose’. This is despite the fact that there’s no trust in the relationship, there’s no entente in the relationship, but there is an enormous amount of interdependence. And I think it’s going to last, at least for a bit.” Wang also met the European Union’s top diplomat Josep Borrell on Friday evening. and British Foreign Secretary David Cameron earlier in the day.