What We’re Watching – The US–China Competition Heats up in Southeast Asia

Welcome to The Geopolity’s What We’re Watching (3W), our daily look at the interconnected worlds of Geopolitics, Economics and Energy. Curated from the world’s leading sources of information, our analysis and commentary is designed to help you make sense of the events driving the major developments in the world.

In this roundup, we take a closer look at how Southeast Asia is affected by, and responding to, the US–China competition.

ASEAN was set up in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand as a bulwark against the spread of communism in Asia. From its early days, ASEAN maintained close ties with the US, and over the years Washington saw ASEAN as a key tool to limit China’s influence.

But under president Trump, through cancelling the TPP to introducing significant tariffs, the US has communicated an indifference toward the interests of Southeast Asian countries.

China is now active to win ASEAN over to its side, and the signing of a new trade deal between China and ASEAN during the most recent ASEAN meeting, a day after president Trump left the meeting grounds, indicates it is having a least some success.

Furthermore, we also look at:

• Israel’s land grab in Gaza, it’s terrorizing of the West Bank, and its escalation of attack on Lebanon, following the Gaza ceasefire
• The trade talks between the US and China, which are not resolving the core issues dividing the two countries
• The steady decline in the oil prices, as OPEC+ delivers on its production increase announcements
• The impact the latest additions to sanctions on Russia are having on demand fro Russian crude oil in India and China

Geopolitics

Gaza – The Israeli military has begun installing yellow concrete markers every 200 metres to delineate the area remaining under Israeli control during what is supposed to be the first phase of the ceasefire, writes The Guardian. The official line cuts Gaza roughly in half, and is increasingly referred to in Israeli media as a “new border”. Since the start of the ceasefire the Israeli military has killed on average 20 Palestinians per day, mostly for approaching the yellow line. Meanwhile, the BBC writes that is marking the yellow line much further inside Gaza than was agreed by the parties involved in the ceasefire agreement. In the north, near the al-Atatra neighbourhood, drone footage from the IDF showed that a line of six yellow blocks were up to 520m further inside. A similar situation is visible in southern Gaza, where a satellite image taken on 19 October showed 10 markers erected near the city of Khan Younis were inside the line by ranges between 180m-290m.

Meanwhile, the eagerness of Israel to relaunch its genocidal was on display after Hamas handed over human remains that did not belong to missing Israeli hostages. Reuters writes that Israel considers the event “a violation of the Gaza ceasefire”. 3W notes the insincerity of this accusation. The US – Israel Alliance flattened Gaza, dropping the equivalent of multiple nuclear bombs on the area, and thereafter did not allow heavy equipment to aid in the recovery of victims from the rubble. In this impossible situation, and with no access to laboratories that can perform DNA testing, Hamas is expected to make no mistakes in retrieving the remains of its Israeli hostages, while tens of thousands of people are buried below Gaza’s devastated buildings. In short, therefore, at 3W we see the Israeli comment as indicating an intent to restart the genocidal campaign against Gaza once Hamas’ leverage has been removed.

As to the West Bank, Israeli forces on Monday stormed the village of Kafr Qud, besieged an area of farmland and shot dead three young men, Abdullah Muhammad Omar Jalmana, 27, Qais Ibrahim Muhammad Al Bitawi, 21, and Ahmed Azmi Arif Nashti, 29, writes The National. The Israeli army also bombed a vehicle belonging to the three men, setting it on fire along with a number of olive trees

Lebanon – Israel has been expanding its attacks on the country over recent days, writes The National. One person was killed in an attack on a car at Naqoura, in Tyre province. Another died in a strike on a vehicle in Nabi Sheet, in the eastern Baalbek region. A Syrian citizen was killed and another wounded in an attack on the town of Al Hafir, also in Baalbek. And on Sunday the United Nations said an Israeli drone dropped a grenade close to peacekeepers in Kfar Kila in southern Lebanon and that an Israeli tank fired towards the patrolling force. In an attempt to calm the situation, the US is sending Morgan Ortagus as an envoy. But, 3W notes before traveling to Lebanon Ms Otagus first travelled to Israel for meetings with Israel’s defense minister Katz. This is not the behaviour of an independent mediator.

Trump visits Southeast Asia – This weak US president Trump travelled to Kuala Lumpur to attend the ASEAN  meeting held there. ASEANwas set up in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand as a bulwark against the spread of communism in Asia. From its early days, ASEAN maintained close ties with the US, and over the years Washington saw ASEAN as a key tool to limit China’s influence, writes The Financial Times. But since president Trump during his first term pulled the US out of the Trans-Pacific Partnership (TPP) free-trade area, which had been negotiated for a decade, triggered a realization among ASEAN countries that maybe the US was not the “trusted partner” they had assumed. Since then, ASEAN members — along with China, Japan, South Korea, Australia and New Zealand — have established the Regional Comprehensive Economic Partnership, the largest trade bloc in history. Despite its origins as an ASEAN initiative, China has become the dominant power in the trading pact. While China was excluded from the TPP, 3W notes. The Trump Tariff War has further increased suspicions in ASEAN regarding the US, FT notes. As Washington has in this way communicated an indifference to the interest of ASEAN countries, China has sensed an opportunity to solidify its influence. Just days after Trump announced his tariffs in April, Chinese President Xi Jinping visited several south-east Asian countries, seeing another opportunity to advance Beijing’s interests. He travelled to Vietnam, Malaysia and Cambodia, advocating multilateralism and co-operation with developing countries, as well as warning against protectionism — in sharp contrast to Trump. For now, most ASEAN countries are trying to maintain a balance in their relations with the US and China. But the direction of travel is that this will become harder to achieve, FT concludes, meaning that eventually ASEAN will experience pressure to pick sides.

Shortly after Trump left Kuala Lumpur, Chinese Premier Li Qiang and Malaysian Prime Minister Anwar Ibrahim oversaw the signing of an agreement to expand the China-Asean Free Trade Area, writes Bloomberg. During a speech, Li sought to project his nation as a champion of free trade and called for unity with the Asean grouping. Without naming the US, China’s No. 2 official appeared to blame Washington for sowing discord in the region. The upgraded agreement, called CAFTA 3.0, carves out new areas including green economy and supply-chain connectivity. This represents a potential strategic win for Beijing, which is seeking new markets for its massive industrial capacity in solar panels, batteries and electric vehicles.

Macroeconomics

Trade – The Trump – Xi meeting on trade that is likely to take place later this week is unlikely to achieve a real breakthrough, writes Bloomberg. Most of what has been agreed ahead of the meeting, such as increased US soybean purchases by China and TikTok, does not touch upon the key issues. 3W shares the assessment. The trade talks that have been taking place between the US and China have focused on preventing the competition between the two countries from spiralling out of control – as it threatened to do when Trump first announced 100% tariffs on China. We also note that what really causes the competition is China’s unwillingness to submit to the US designed “rules-based order”. It is for this reason that the US is abandoning this order, as without China, it is no longer useful to the US, and is now focused on preventing a further rise of China which could threaten US hegemony over Asia.

Energy

OPEC+ is pushing ahead with its announced production increases, despite weak oil prices, writes Javier Blas of Bloomberg. As to what this is likely to mean for the oil price, Blas expects that until prices drop below $50 per barrel, there will be no changes to the current OPEC+ policy. The OPEC+ policy makes this price level a real possibility, as the US and European sanctions on Russia’s main oil companies are unlikely to remove significant volumes of crude oil from the market.

India – Many Indian refiners are pausing new Russian oil orders, awaiting clarity on how things will develop, writes Reuters. A number of tenders have been issued by India’s refining companies indicating a search for alternative supplies.

However, Indian Oil Corp, the country’s top refiner, will not completely discontinue buying Russian crude, the company said according to a separate Reuters report. “We are absolutely not going to discontinue (buying Russian crude) as long as we are complying with the sanctions. Russian crude is not sanctioned. It is the entities and the shipping lines which have got sanctions,” Anuj Jain, director of finance, said in a post earnings analyst call. “If somebody comes to me with a non-sanctioned entity, and the cap is being complied with, and the shipping is okay, then I will continue to buy it,” he added.