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In this roundup, we take a closer look at the interview US special envoy Tom Barrack gave to the Emirati newspaper The National.
In it, Barrack made a number of statements that in the EPM view can only be classified as bizarre: factually incorrect, logically incoherent, devoid of any vision, and both aloof and uninformed as to the dominant thoughts and emotions in the realm of Middle Eastern diplomacy.
Therefore, in the EPM assessment, if there is one takeaway from this interview, it is that US diplomacy has reached absolute rock bottom, being led as it is by fundamentally incompetent people.
Furthermore, we look at:
- ExxonMobil’s seventh major investment in Guyana, which is moving its operations there to a production of 1.7 mbd
- The tie up between Nvidia and OpenAI, which will see the prior invest $100 billion into the latter
- How the Trump administrations new H-1B visa is upsetting the trade talks between the US and India
- The calls at the UN to establish a Palestinian state; the US – Israel Alliance’s response, which includes an acceleration of settlement activity on the West Bank to make a Palestinian state a practical impossibility; and EPM’s view that this whole subject is just a distraction as it will not change anything practically, on the ground
- BP’s withdrawal from the global biofuels business
- The New York City Climate Week, and the efforts to get countries to develop updated decarbonization plans, despite the US pullback from the global climate change agenda
- The Trump administration pressure on the World Bank to fund more fossil fuel projects
- Porsche’s decision to pull back from its electrification plans; where EPM explains why we see this less as indication of the state of the electrification of transport, more as an indication of how the electrification is playing out, which is that Europe’s (and America’s) automotive powerhouses are rapidly falling behind China and just can not compete anymore
General Energy
Oil prices dropped for a fifth consecutive day on Monday, writes Bloomberg. Global benchmark Brent fell toward $66 a barrel after slipping 2.8% over the previous four sessions, while West Texas Intermediate was near $62. The IEA thesis that an oversupply situation is developing appears to be winning the “minds and hearts” of oil traders, despite the OPEC arguing that economic growth will absorb these barrels.
ExxonMobil has approved funding for its seventh development project in Guyana called Hammerhead, bringing its oil joint venture another step closer to its goal of producing 1.7 million barrels of oil equivalent per day by 2030 from the country, writes Reuters. The Hammerhead development will use a floating production storage and offloading vessel with the capacity to produce about 150,000 barrels of oil per day. First oil from the $6.8 billion project is expected in the second quarter of 2029. ExxonMobil operates the Stabroek Block with a 45% interest. Its partners Chevron and CNOOC hold 30% and 25%, respectively.
Macroeconomics & Technology
Nvidia and OpenAI have announced an important tie up. Nvidia will invest up to $100bn in OpenAI and provide it with data center chips, writes The Guardian. The deal will involve two separate but intertwined transactions. OpenAI will pay Nvidia in cash for chips, and Nvidia will invest in OpenAI for non-controlling shares. The first $10bn of Nvidia’s investment in OpenAI, which was most recently valued at $500bn, will begin when the two companies reach a definitive agreement for OpenAI to purchase Nvidia chips. “Everything starts with compute,” Sam Altman, CEO of OpenAI, said in a release. “Compute infrastructure will be the basis for the economy of the future, and we will utilize what we’re building with Nvidia to both create new AI breakthroughs and empower people and businesses with them at scale.”
On the trade war front, the Trump administration decision to impose a $100,000 application fee for H-1B skilled worker visas does little to help improve relations between the US and India. US authorities say that of the 730,000 H-1B visa holders in the US, over 70 per cent are Indian, writes The Financial Times. Piyush Goyal, India’s commerce minister and top trade negotiator, who is currently visiting the US after face-to-face talks resumed between New Delhi and Washington, accused Trump’s government of being “afraid of our talent”. The Indian economy could potentially be significantly affected by the new rule, as remittances from the US to India could fall by $8bn, or about 0.2 per cent of GDP.
The European Union is getting ready to announce its 19th sanctions package on Russia, writes Politico. This time, 12 Chinese and three Indian entities are scheduled to be added to a list that prohibits the bloc’s companies from doing business with them, as punishment over their purchasing of Russian crude oil. In addition, the sanctions package will impose a ban on Russian LNG purchases by the end of 2026. EPM sarcastically notes until 2027, no EU companies or countries will be sanctioned over their continued purchases of Russian LNG. On a more serious note, the expansion of EU sanctions to Chinese and India countries indicates the EU is following US suggestions / demands when it comes to its international economic policy. Obviously, this puts the EU on a collision course with China and India. At EPM we do not see how this could serve European economic interests. Instead of picking sides by submitting to the US, EPM believes the EU should aim for becoming a non-aligned player in between the US and China, which it can be considering its economic size. But possibly the experts in Brussels know better.
Clearly, the new EU sanctions do not further the latent ambition to establish the India Middle East Corridor (IMEC), that according to The National Interest continues to be an EU objective.
Geopolitics
As to Gaza, the genocidal actions by the US – Israel Alliance have led to dozens of world leaders gathered at the United Nations on Monday to call for establishment of a Palestinian state, writes Reuters. These nations include France, the UK, Turkey, Spain, Canada and Australia, who on Monday were joined by Luxembourg, Malta, Belgium and Monaco. EPM previously said regarding this development that it is a purely symbolic move, not something that will have a practical reality on the ground. The only thing it indicates is that political elites in countries that traditionally support Israel are now experiencing a growing popular pressure to change course on their relationship with the country. This has the potential of making Israel a “pariah state”, akin to South Africa during Apartheid. This would have far reaching implications for the Middle East as the current state of Israel, considering its size, can not survive without the active financial, military and diplomatic support from the US and Europe.
Connected to the above, the US – Israel Alliance is actively working to prevent a Palestinian state from being established, writes Reuters. Israel has accelerated plans for settlements that it hopes will make the two-state solution impossible., it says. Approval to build settlements has accelerated rapidly under the current Israeli government, which includes vehemently pro-settler parties that want to annex the West Bank to Israel. Here, EPM notes that even the Palestinian state that the US proposed under its “Two State Solution” plan from the 1990s was already an artificial construct that could not reasonable be considered a sovereign state. Already then it resembled “swiss cheese” on the map due to the Zionist settlements in the West Bank and Gaza that were to be excluded from this state, which meant it did not have the geographic characteristics required for a state to be feasible. In addition, this state was to not to have a military for defense, and its economy was to be integrated into that of Israel, meaning it would be dependent on Israel.
In an interview with The National, US special envoy Tom Barrack has said Middle East peace is an “illusion”. “When we say peace, it’s an illusion,” Barrack said. “There’s never been peace [in the Middle East]. There will probably never be peace because everybody’s fighting for legitimacy.” “Personally, I hate what’s happened in Gaza on all sides. For the Palestinians, for the Israelis, for the Jordanians, for the Lebanese, for the Syrians, for the Turks. You know … it’s a mess,” Barrack also said. “But”, he further said, “Israel is a valued ally. We subsidise them [by] $4 to 5 billion a year. It has a special place in America’s heart, and we’re living with the confusion of what’s happening in this transition. So it’s complicated.” EPM apologizes, but we really do not know what to say in response to this bizarre interview. It’s factually incorrect from a historical perspective. It is factually incorrect in its analyses of the current reality. It is logically incoherent. It does not contain any hints about a vision for the future. It is also both aloof and uninformed as to the dominant thoughts and emotions in the realm of Middle Eastern diplomacy, as Barrack said “no lasting damage has been done to US-Gulf relations” by the Israeli attack on Qatar. Therefore, if there is one takeaway from this interview, it is that US diplomacy has reached absolute rock bottom, being led as it is by fundamentally incompetent people.
As to Syria, Israel has presented the new Syrian government with a detailed proposal for a new security agreement, writes Axios. The Israel proposal, fully backed by the US which is now organizing trilateral meetings to discuss it, includes a proposed demilitarized zones from Damascus southwest up to the border with Israel, according to two sources familiar with the details. Israel has also proposed a gradual withdrawal from all of the territories it has occupied in Syria over the last few months, except for an outpost on the summit of the strategic Mount Hermon that is to become a de facto, permanent part of Israel. In addition, Syria is to provide Israel an aerial corridor to Iran, which would allow for potential future Israeli strikes in Iran. EPM notes this is quite an interesting tactic by the US – Israel Alliance. First you illegally occupy the sovereign territory of another nation. Then you demand major concessions from that other nation, in return for giving back to it that which legally is already part its sovereign territory. It is further evidence of the US – Israel Alliance attempting to establish a new reality in the Levant, which EPM previously explained in our update on the Alliance’s “New Levant” plan.
The new Syrian government, strongly supported by the US, is willing to agree to the Israel terms, writes Al Monitor. Preparations are underway for a historic meeting this month between Israeli Prime Minister Benjamin Netanyahu and Syrian President Ahmed al-Sharaa on the sidelines of the UN General Assembly meeting in New York, it says. Sharaa told reporters that ongoing negotiations with Israel on a security pact could yield results “in the coming days.”
As to the Saudi Arabia – Pakistan security pact announced last week, Pakistan’s Defence Minister Khawaja Muhammad Asif provided more insight into its content. In an interview with local media Asif said that Pakistan will use “everything at its disposal” to implement the agreement, including nuclear power, writes the New Arab. The minister also revealed that the pact is open to other Arab countries, stressing the need to create an Islamic alliance similar to NATO. Asif explicitly denied any prior coordination with the United States regarding the agreement.
Meanwhile, Arab News writes that the pact “includes defense industry collaboration, with potential for technology transfer and co-production of military equipment, as well as capacity building and training.”
Last week EPM did not share its analysis of the security agreement, but we think now is an appropriate moment to do so. We see two possible explanations for it. One is the explanation by most geopolitical analysts, who tend to ignore history and assume that the countries in the Greater Middle East think and act independently for their own interests. Under this assumption, the security agreement is a response to the aggression of the US – Israel Alliance, signifying that this is causing the other countries in the region to distance themselves from the US following the clear failure of the so-called “US protective umbrella”. However, at EPM we believe that history shows the countries in the Middle East tend to closely align themselves with a western power, similar to the way the EU is currently seeking to align itself with the US, which means by submitting to every western demand. Under this assumption, Asif’s explicit denial of any coordination with the US actually leads one to the conclusion there was coordination with the US. His choice of words, opting to speak of an Islamic NATO rather than, say, an Islamic SCO, provides a further clue there has been coordination with the US. In this case, the security agreement is more about preventing the countries from the Greater Middle East to go down an independent trajectory. By establishing a platform where countries can collaborate, while ensuring this platform is designed by the US and led by the US’s main allies in the region, the US can then ensure that even countries with ambitions to become more independent in fact remain closely tied to it. Until further information proves us wrong, this is what EPM sees as the most likely explanation for the Saudi Arabia – Pakistan security pact. We also note that this security pact effectively isolates Iran, which had sought closer collaboration with its neighbour Pakistan during and after the attacks on it by the US – Israel Alliance. This point is also noted by Nikkei Asia. If Iran were to join the Saudi Arabia – Pakistan security pact, which woukld make sense if it truly was an independent effort to establish security outside of the US umbrella, we will reconsider our opinion.
As to Ukraine, Russian planes entered Estonian airspace on Friday, writes Politico. Coming on the heels of the Russian drones that entered Polish and Romanian airspace earlier, Ukraine and EU officials used the event to promote the narrative that Russia is a mortal threat to European interests, EPM notes. Ukrainian President Volodymyr Zelenskyy said Moscow’s attacks were expanding into new countries and directions. “This is a systematic Russian campaign directed against Europe, against NATO, against the West. And it requires a systemic response,” Zelenskyy said. EU foreign policy chief Kaja Kallas described the incursion as “an extremely dangerous provocation.” In the EPM view, the unexplained incursions, together with the European narratives and language in response, indicates there is an intent to escalate the current war in Ukraine to a regional conflict. At EPM we long recognized this scenario, but considered it unlikely. Today, we have to adjust our perspective on its likelihood. The key signpost to watch is the US response. So far, as in the case of the Russian drones entering Poland, the US response has been about calming things down, which we said indicates the European want regional escalation but the US does not. Since Europe depends militarily on the US, Washington gets to decide the way the Ukraine War will play out. Reuters writes that the US response to the Estonia incident has so far been muted. Reuters also notes that the incursion comes around a month after the US formally informed the Baltic states and the European Union that it would reduce its security support for Estonia, Latvia and Lithuania.
As to Venezuela, the US military has conducted a third fatal strike on a vessel in international waters offshore Venezuela, writes the Financial Times. US president Trump said late on Friday that on his orders, three “male narcoterrorists” were killed on board the boat.
Venezuelan president Nicolas Maduro offered to engage in direct talks with the administration of US president Donald Trump, writes Reuters. In a letter to Trump that was viewed by Reuters, Maduro rejected US claims that Venezuela played a big role in drug trafficking, noting that just 5% of drugs produced in Colombia are shipped through Venezuela, of which he said 70% were neutralized and destroyed by Venezuelan authorities.
Meanwhile, Maduro’s Youtube account was taken offline by Google over the weekend, writes The Associated Press. EPM notes that at first sight this might appear trivial information. However, if other social media companies were to do the same over coming days, then this would indicate a concerted effort by the US to take control of the narratives regarding its conflict with Venezuela, by blocking Venezuela’s efforts to present its narratives to the American public. Narrative control exercise, meanwhile, are usually deployed in advance of military confrontations.
As to the US – China competition, an article in MIT’s International Security magazine analyzed data from 12,000 articles and hundreds of speeches by Xi Jinping, to discern China’s intentions. It concludes that that China is a status quo power concerned with regime stability and is more inwardly focused than externally oriented. China cares predominantly about its borders, sovereignty, and foreign economic relations. The article’s main conclusion is that the conventional wisdom, which holds that China is a rising hegemon eager to replace the United States, dominate international institutions, and re-create the liberal international order in its own image, is largely false.
The EPM moves to what appears to be another developing crisis – as if the world did not have enough already. US president Trump appears to be threatening Afghanistan with another military invasion, writes Reuters. Trump said that the United States had sought to regain control of the Bagram base in Afghanistan, and that he was speaking with Afghanistan about it. Afghan officials have expressed opposition to a revived US presence, however. This trigger Trump to write on his social media account that “If Afghanistan doesn’t give Bagram Airbase back to those that built it, the United States of America, BAD THINGS ARE GOING TO HAPPEN.” EPM notes a US military presence in Afghanistan makes sense from a geostrategic perspective. Afghanistan border China’s Muslim-majority Xinjiang region in its far-west. An airbase in Afghanistan would greatly benefit any attempt to militarily encircle China via South Korea, Japan, Taiwan, the Philippines, Singapore, Indonesia and Malaysia, and India and Pakistan.
Energy Transition
Following in the footsteps of Shell, BP (has stopped work on its Rotterdam biofuels plant, writes Reuters. In recent months BP has halted plans to build standalone biofuels plants at its Kwinana site in Australia, paused work at plants in Lingen, Germany, and Cherry Point in the United States, leaving its Castellon site in Spain as a potential long-term option for further development. As recently as 2023 BP said those plants and the Rotterdam project were expected to produce a combined 50,000 bpd by 2030. None of them has made it to a final investment decision. Consequently, and more importantly from a strategic perspective EPM notes, BP also announced it has dropped its target to produce 100,000 barrels per day (bpd) of biofuels by the end of the decade. This leaves BP’s biofuels business focused on BP Bunge Bioenergia in Brazil, with capacity of 50,000 bpd of ethanol from sugarcane, and co-processing at existing oil refineries. This is means BP has drop biofuels as a business priority, since Brazil is a niche opportunity that can not easily be replicated elsewhere. Our final EPM thought is that the withdrawal of Shell and BP from the global biofuels business is good news for companies such as Neste that made the pivot into biofuels much earlier than the IOCs. There will be demand for biofuels as a niche product, in our assessment, and the number of suppliers for this is now rapidly reducing.
Climate Politics
The New York City Climate Week has kicked off, and it is designed to designed to get nations to strengthen their required — but already late — plans to reduce their emissions. Despite the US going the other direction, writes The Associated Press. The nations of the world all were supposed to come up with new five-year plans for curbing carbon emissions by February, leading into the Brazil negotiations. But only 47 of the 195 nations — those responsible for less than a quarter of global emissions — have done so. UN officials said they should be submitted by the end of this month so experts can calculate how the world is doing in its emission-reduction efforts. The world’s biggest emitter, China, and another top polluter, the European Union, are expected to announce their plans or rough sketches of their plans this week.
Meanwhile, the Trump administration is pressuring the World Bank to fund more fossil fuel projects, writes The Financial Times. In 2023, the bank said it aimed to provide 45 per cent of its annual financing to climate by 2025. But in a June meeting of the World Bank’s board, US officials strongly supported the bank lending to projects that would unearth new stores of natural gas. “The Americans are talking about all gas everywhere,” said a senior official from a country on the board of the World Bank.
The Electrification of Transport
Porsche last week announced it is dialing back plans for its electric vehicle rollout, writes Reuters. Volkswagen said it would take a 5.1 billion euro ($6 billion) hit from the far-reaching product overhaul, which delays some EV models in favour of hybrids and combustion engine cars. Porsche will now extend the production period of currently available vehicle models with internal combustion engines (ICE) and hybrid drivetrains, including the Panamera, into the 2030s, Oliver Blume, CEO of both Porsche and Volkswagen, said. In the EPM assessment, from a pure technology perspective, if there ever was a time to strategically pivot to electric vehicles, it is now, as there is no doubt anymore that EVs are / will soon become cheaper to manufacture and operate than ICEVs. Electrification technology continues to outpace most expectations, namely, primarily driven by the Chinese battery and automotive companies. Battery costs are now well below $100/kWh and battery ranges have been lifted to 800 km. Therefore, Porsche’s decision to pull back at this moment is more likely caused by company performance. The company says it is dealing with weak demand for its products, and profit margins are low at 2% compared to a target of 5-7%. In other words, the company might just not have the cash needed to make the transition to electrification. At the same time, it is quite clear that China now dominates in all aspects of automotive technology, from batteries, to software, to design. That, i.e. competitive pressures, is probably one of the main reasons why Porsche’s profit margins are so low. In conclusion, therefore, at EPM we don’t see Porsche’s announcement as an indication of the state of the electrification of transport. Rather, we see it as an indication of how the electrification is playing out, which is that Europe’s (and America’s) automotive powerhouses are rapidly falling behind China and just can not compete anymore.
Bloomberg looks at Porsche’s financial performance over recent years, which supports EPM’s thesis regarding the company’s “strategic pivot” back to ICE.