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 the US security guarantee to Qatar. Furthermore, we look at:
- The latest US government shutdown
- How Europe is getting outcompeted in refining by the Middle East, Asia and Africa
- How China’s technological advancements in “New Energy” are enhancing its geopolitical power, especially in the developing world
- How renewables are driving electricity prices in Spain below the European average
Geopolitics
As to Gaza, Israel’s defense minister Israel Katz on Wednesday ordered all remaining Palestinians to leave Gaza City, saying it was their “last opportunity” and that anyone who stayed would be considered a militant supporter and face the “full force” of Israel’s latest offensive, writes The Associated Press. “Those who remain in Gaza will be (considered) terrorists and terror supporters,” Katz added. 3W notes that while some might attempt to present this as a humanitarian gesture, a warning, legally speaking it is of course a major war crime for it is nothing short of forced expulsion of a civilian population under threat of death.
As to Qatar, the US is in damage control mode. CNN writes that US president Trump is giving Qatar a NATO-esque security guarantee. “In the event of such an attack, the United States shall take all lawful and appropriate measures — including diplomatic, economic, and, if necessary, military — to defend the interests of the United States and of the State of Qatar and to restore peace and stability,” a recent executive order says.
3W notes this is extraordinary. The US has never provided such a broad promise to defend an Arab country. And it has now provided it to Qatar, although Saudi Arabia has been asking for it for years.
3W notes this is extraordinary. The US has never provided such a broad promise to defend an Arab country. And it has now provided it to Qatar, although Saudi Arabia has been asking for it for years
Then as to why. One possible reason we at 3W can see is the diplomatic fallout from the US – Israel Alliance attack on Qatar. This is significant and it could be that the US is now in damage control mode, It could be that a variety of regional countries are on the verge of losing trust in the US, and that the US felt compelled to take this step in an effort to restore trust.
But at 3W we also see another possible reason, one that is connected to the Gaza ceasefire proposal. When we analyzed this proposal we said Iran should be worried, as it is not impossible that the timing of this Gaza ceasefire initiative is linked to a plan to restart the US – Israel Alliance’s attack on Iran. The recent relocation of American refueling planes to Europe adds credence to this speculation. If indeed the Alliance plan is to attack again, one should expect the gloves to come off on both sides, i.e. the Alliance and Iran. In this case the US airbase in Qatar is likely to become a target. In this case, the US security guarantee for Qatar is actually useful for the US as it would allow the US airforce to strike Iran from Qatar, on the pretext that it is a defensive move.
Lastly, 3W notes that the promise to protect Qatar is made via executive order, which means it is not something future presidents will have to abide by. In our current assessment, the security guarantee to Qatar is a conscious, pro-active US move, that is fast and temporary by design, because it is connected to a planned attack on Iran. We hope we are wrong.
Macroeconomics
The latest US government shutdown began at midnight on October 1, as the US Congress failed to pass a stopgap funding measure. Bloomberg writes it is the third under President Donald Trump across his two terms, and the first in almost seven years. Democrats are demanding that a stopgap bill include an extension of Affordable Care Act premium subsidies and a reversal of Medicaid funding cuts, conditions Republicans have rejected. The White House’s budget office has by now ordered agencies to begin executing their plans for a funding lapse, ending government operations and services except for essential duties. The Congressional Budget Office estimates that about 750,000 employees will be furloughed at a cost per day of $400 million in lost compensation during the current shutdown. Trump has threatened to use the shutdown to fire federal workers permanently en masse.
Energy
Modern and more complex competitors in Asia, the Middle East and Africa have prompted refinery plant closures in Europe, writes Reuters. Pressured by environmental regulations and competition from modern plants, European refineries have been trying to ramp up production of cleaner products such as sustainable aviation fuel and biofuels to survive. Essar plans to make a final investment decision on its major blue hydrogen plant in the UK at the turn of the year. Essar also won government backing for a sustainable aviation fuel (SAF) plant at Stanlow this year. PKN Orlen, meanwhile, aims to increase co-processing to increase SAF output and invest in advanced biofuel production capacity.
Diesel trucks in China are heading down the same path that cars with internal combustion engines have gone down over the past few years, writes The Financial Times. China’s state subsidies, a structural drop in battery prices and technological improvements in range and power output are set to lead to a rapid displacement of diesel trucks in the country. Similar shifts are being seen across a panoply of sectors such as solar panels, wind turbines and batteries achieved via China’s market scale, innovation and state support. This is offering hope to many countries to reduce — perhaps one day eradicate — a reliance on oil, petroleum and diesel imports while giving China opportunities to deepen its geopolitical influence. Large swaths of the developing world now appear focused on the immediate upside of partnering with China. Solar exports to Africa, just one narrow example, surged 60 per cent in the year to June.
Soaring renewables output in Spain is weakening gas’s grip on electricity prices, writes Bloomberg. The development sets the country apart from much of Europe where fossil fuels still dictate the cost of power. European countries generally use a marginal pricing system, where the most expensive megawatt needed to meet demand — frequently a gas-fired plant — sets the price for all generators. But Spain’s rapid renewables build-out means that in the first half of this year, its power prices were set by fossil generation just 19% of the time, down from 75% in 2019. As a result, wholesale electricity was almost a third cheaper than the European Union average.