Welcome to The Geopolity’s What We’re Watching (3W), our daily look at the interconnected worlds of Geopolitics, Economics and Energy.
On what is the second-year anniversary of October 7th 2023, we take a closer look at the events surrounding the US – Israel Alliance genocide in Gaza. While Israel’s military operation inside Gaza continues, negotiations have started in Egypt on the basis of the Trump Peace Plan.
Further surrounding Gaza is Israel’s military operation against the Global Sumud Flotilla. While much of the world’s attention is focus on the poor, borderline torturous treatment Israel handed out to those it arrested on the Flotilla, 3W explains why the entire operation was, in effect, piracy and a war crime.
Furthermore, we look at:
- Japan’s plan to expand its tariffs on China to include Chinese products coming into Japan via 3rd countries
- The rapid – and dangerous – rise in private credit institutions in the US, which mimics China’s “shadow banking system”
- OPEC+’s confirmation that it will raise oil output from November onwards by 137,000 barrels per day
- Why current oil price levels require significant operational and financial adjustments by the world’s largest oil companies
- China’s continued investment in crude oil strategic storage facilities
- The growth in renewables deployment during the first half of 2025, which indicates that renewables have the capacity to meet at least the growth in energy demand globally, and potentially even more
- OpenAI’s strategy, and its partnership agreement with AMD, which comes about a month after it signed such a deal with AMD;’s main competitor NVIDIA
Geopolitics
As to Gaza, Israeli forces intercepted the Global Sumud Flotilla, a fleet of 42 boats seeking to break Israel’s naval blockade of Gaza and deliver a symbolic amount of aid to the famine-stricken territory. Australia’s ABC News writes that the Israeli military operation breached international law, as the Flotilla was boarded in international waters. Effectively this means the Israeli’s pirated the Flotilla, 3W notes. ABC News further notes that even if the Israeli operation had taken place within territorial waters, it would still have represented a crime against international law, as Gaza’s territorial waters are not Israel’s; as Israel has not right under international law to establish a siege of Gaza; and as international law established a right to forcefully breach a siege if a population is not properly provided for by an occupying power.
Those detained during the Israeli piracy operation were brought to Israel, where many remain in prison. Some of the detained activists have now returned to their home countries to describe mistreatment at the hands of Israeli guards, writes The Associated Press. Italian journalist Lorenzo D’Agostino said detainees were repeatedly woken during the two nights he spent behind bars. They were also intimidated with dogs and by soldiers pointing the laser sights of their guns at prisoners “to scare us,” he said, adding that his belongings and money had been “stolen by the Israelis.” Activist Paolo De Montis described being crammed into a prison van for hours with his hands secured by zip ties. “Constant stress and humiliation,” he said. “You weren’t allowed to look them in the face, always had to keep your head down and when I did look up, a man … came and shook me and slapped me on the back of the head. They forced us to stay on our knees for four hours.” Israel’s National Security Minister Itamar Ben-Gvir said, “I was proud that we treat the ‘flotilla activists’ as supporters of terrorism. Anyone who supports terrorism is a terrorist and deserves the conditions of terrorists”.
Nine members of the flotilla who arrived home in Switzerland alleged Israeli forces mistreated them via sleep deprivation, lack of water and food, as well as being beaten, kicked, and locked in a cage, writes Reuters. Spanish activists also alleged mistreatment on their arrival in Spain after being deported from Israel. ABC News has a detailed report about the abuses against the Australian and New Zealand activists on the Flotilla, which includes being assaulted, slapped in the face, taunted, verbally abused, sleep deprived, given dirty water, and threatened with sexual assault. Among those detained were Swedish activist Greta Thunberg, Nelson Mandela’s grandson Mandla Mandela and several European lawmakers. Thunberg was singled out by Israeli forces after being arrested, and according to some of her fellow activists was “treated like a animal” by the Israeli forces.
Meanwhile, delegations from Israel and Hamas held their first day of indirect negotiations in Egypt on Monday, writes Reuters. The Israeli delegation includes officials from spy agencies Mossad and Shin Bet, Netanyahu’s foreign policy adviser Ophir Falk and hostages coordinator Gal Hirsch. Israel’s chief negotiator, Strategic Affairs Minister Ron Dermer, was expected to join later this week, pending developments in the negotiations, according to three Israeli officials. The Hamas delegation is led by the group’s exiled Gaza leader, Khalil Al-Hayya, who survived an Israeli airstrike that killed his son in Doha, the Qatari capital, a month ago. The US has sent special envoy Steve Witkoff and Jared Kushner, the president’s son-in-law who has strong ties to the Middle East. A thorny issue is likely to be the Israeli demand that Hamas disarm. The group has insisted it will not disarm unless Israel ends its occupation and a Palestinian state is created.
Macroeconomics
Japan appears to be following the US example when it comes to trade policy vis-à-vis China. It plans to expand the scope of antidumping duties on China, to include indirect exports via third countries, as punishment China’s “overproduction”, writes Nikkei Asia. 3W notes there is a fine line between using tariffs to protect an economy against predatory behaviour by other countries, and using tariffs as a tool of economic warfare.
Since the 2008 financial crisis, over 500 new private credit funds have been established in the US, on top of many business development companies (BDCs) which also engage in private credit, attracting a tsunami of cash. The explosive growth of US private credit over the last few years has striking — and dangerous — parallels with China’s shadow banking system, writes Nikkei Asia. Both US private credit today and China’s pre-2018 shadow banking system grew by trillions of dollars in a few years. Both created indirect risks for commercial banks and insurance companies. And both rushed to raise money from retail investors. The difference is that China’s regulators managed to rein in the excesses of shadow banking, avoiding a crisis and creating a far healthier domestic credit environment. The judgement is still out whether the US will be able to do the same.
Energy
OPEC+ has officially confirmed that as previously speculated, it will raise oil output from November onwards by 137,000 barrels per day (bpd), the same monthly increase as in October, writes Reuters. Saudi Arabia would have preferred double, triple or even quadruple that figure – 274,000 bpd, 411,000 bpd or 548,000 bpd respectively – because it has spare capacity and wants to regain market share more quickly, sources said ahead of the meeting. But Russia was advocating for a modest output increase, the same as in October, to avoid pressuring oil prices, and because it can not raise its production as easily as Saudi Arabia.
The five biggest global oil majors are moving to cut costs, jobs and share buybacks as falling oil prices threaten to make shareholder payouts unsustainable without increasing debt, writes Reuters. The generous payouts to investors, which have topped $100 million annually since 2022, have increasingly been funded by debt as energy prices retreated from highs caused by sanctions and supply disruptions in the wake of Russia’s invasion of Ukraine. Most oil majors require Brent to average $80 per barrel to maintain current levels of dividend payout and share buybacks. Consequently, the oil majors, now pressed to reinvest in exploration and production, must choose between cutting some operations, letting debt rise to unsustainable levels or weaning shareholders off popular but pricey returns. While ExxonMobil, Chevron, Shell and BP have all announced job cuts to deal with the current oil price environment, only Chevron and BP has announced reductions in shareholder payouts.
China, the world’s largest crude oil buyer, is adding eleven new oil reserve sites this year and next, writes Reuters. The move means Beijing is accelerating stockpiling of the strategic commodity to safeguard supply security. The sites have a combined capacity of 26.8 million cubic meters, or about 169 million barrels, equivalent to two weeks of China’s crude oil imports. By comparison, China added 180-190 million barrels of storage capacity between 2020 and 2024.
Global solar generation grew by a record 31% in the first half of the year, while wind generation grew by 7.7%, writes The Associated Press. Solar and wind generation combined grew by more than 400 terawatt hours, which is more than overall global energy demand increased in the same period. This means that the total share of fossil fuels in the global energy mix dropped, for the first time in history, by 1%. 3W notes this indicates that renewables have the capacity to meet at least the growth in energy demand globally, and potentially even more.
While the US is focused on increasing its exports of conventional fossil fuels, China is focusing on increasing its exports of “new energy solutions”, such as solar panels, wind turbines, batteries and EVs. For now, there is a clear winner, China, writes Bloomberg. The US sold $80 billion in oil and gas abroad through July, the last month with data available. China exported $120 billion in green technology over the same period.
Technology
OpenAI has provided insight into its strategic vision. The company has revealed a flurry of collaborations with companies including Spotify, Zillow and Mattel, while debuting a set of fresh tools to help these companies build new applications for their customers, writes Reuters. It means, in other words, that OpenAI is now focusing on becoming a platform that other apps can plug into. “What you’re going to see over the next six months is an evolution of ChatGPT from an app that is really, really useful into something that feels a little bit more like an operating system,” ChatGPT head Nick Turley said.
Meanwhile, OpenAI has signed another strategic partnership agreement with AMD, writes The Associated Press. Under the terms of the deal, OpenAI will buy the latest version of the company’s high performance graphics chips, the Instinct MI450, which is expected to debut next year, and will also get the option to buy as much as a 10% stake in AMD.
The Financial Times writes this brings the total value of OpenAI’s recent strategic partnership agreements to some $1 trillion dollars. In addition to AMD the company has signed agreements with Nvidia, Oracle and CoreWeave for computing power to run its artificial intelligence models.
Source: The Financial Times