Geopolitical Viewpoint – Issue 1, January 2020

Iran-US conflict in Iraq

Iran-US tension resurfaced again with the beginning of 2020. The killing of Quds Force Commander General Soleimani led to missile strikes on the US military bases in Iraq by Iran. The conflict spiralled down to the shooting of Ukrainian passenger plane by Iranian forces (IRGC).  Iran lately admitted the mistake of shooting down commercial jetliner in which 82 Iranians, 63 Canadians, 11 Ukrainians, 10 Swedes, 4 Afghans, 4 Germans and 4 British nationals lost their lives.

Crude oil prices remained stable during the last fortnight. A decade ago, any such crisis in West Asia would have led to a drastic rise in crude oil prices; burdening oil-importing countries with price shock.

The United States, the biggest importer of crude oil, has emerged as the largest producer and net exporter with the shale gas revolution. It has reduced American dependence on West Asia for crude oil. As a result, geopolitical events and conflicts in the region have a limited impact on oil prices volatility.

Internal Challenges for Iran

The negative economic situation at home, mounting sanctions and political dissent leave Iran with limited room for a long and overt offensive. In Iran, inflation is hovering at around 40 per cent. With re-imposition of sanctions, the number will exceed further up. Iranian Rial (Iranian currency) is at about 42,200 against US Dollar. In contrast, currency valuation of other oil-producing economies in the region such as the Kingdom of Suadi Arabia and UAE stood at 3.75SAR and 3.67AED, respectively.

Adding to complications, three members of P5+1, France, Germany and the United Kingdom have activated Dispute Resolution Mechanism under section 36 the Joint Comprehensive Plan of Action (JCPOA), the Iran Nuclear deal framework agreement. Article 36 states ‘if any of the E3/EU+3 believed that Iran was not meeting its commitments under this agreement, any of the party could refer the issue to the Joint Commission for resolution in stipulated timeframe”. If the issue remains unresolved, then complaining parties can cease performing its commitments and notify the UN Security Council about non-performance. In such a scenario, UN Security Council resolutions would be re-imposed. Most UN sanctions were withdrawn in 2016 after agreement on JCPOA.

US President may not drag the United States in another protracted war in West Asia considering US election in November this year and his election promises. The overt conflict is now over. However, political actions and covert side of this conflict will remain on the top.


Turkish Forces in Libya After Turkey-Libya Maritime Deal

The parliament of Turkey approved the deployment of forces in Libya. The move will further deteriorate the situation in Libya that remains mired in a civil war and armed conflict since 2014. Two political power centres have emerged in Libya with one in Tripoli and another in the eastern city of Tobruk. Turkey has been supporting Tripoli.  The opposing group, Libyan National Army, has emerged as the counter-force against radical elements such as ISIS and the Muslim Brotherhood. Libyan National Amy has been accusing Turkey of supporting terrorist groups in Libya and providing them with weapons.

Turkey has also been supportive of Muslim brotherhood in Libya, jeopardising its relations with Egypt. A safe haven for the Muslim Brotherhood in Libya will complicate the security situation in Egypt. According to the Egyptian Government, counter-terrorism actions and denying support to terrors groups will be essential in ending the crisis in Libya.

In November last year, Tripoli-based Government of National Accord (GNA) and Turkey signed a memorandum of understanding on maritime delimitation in the Mediterranean (Near Libyan Sea). With control over EEZ (Exclusive Economic Zone) across the sea, the agreement bolsters Turkey’s strategic position and provides Turkey leverage in regional energy and gas pipelines projects.

The move will have repercussions for Mediterranean nations like Cyprus, Egypt, Israel, and Greece. Greece ordered the expulsion of the Libyan ambassador in retaliation. The agreement disputes with Greek EEZ. Turkey has claimed that the agreement is in accordance with international laws including the United Nations Convention for the Law of the Sea (UNCLOS). However, Turkey is not party to the convention.

Greece brought the maritime dispute with Turkey before the UN Security Council as well as the International Court of Justice (ICJ) in 1976. Turkey rejected ICJ’s jurisdiction over the dispute.

Foreign Minister of Cyprus, Egypt, France, and Greece said that the agreement would undermine regional stability and declared maritime deal invalid on January 8, 2020, in Cairo.

Considering its strategic interest, Tukey will safeguard GNA’s position in Tripoli against the Libyan National Army.

Last month, Turkish Navy intercepted and forced Israeli oceanic research ship to leave Cyprus’s territorial waters in the Levantine Sea. The Israeli research expedition was in coordination with Cyprus. Turkey’s military actions in EEZ of Cyprus undermine the sovereign rights of the Republic of Cyprus.

Energy, gas pipelines and resources are points of contention in the region. Turkey is aiming for total control of the sea beyond its territorial waters. Its actions will not go well for an already volatile region.


India Restricts Import of Refined Palm Oil

India, the largest buyer of edible oil, has placed restrictions on import of refined palm oil. Restrictions will hinder the import of refined palm oil from Malaysia. Malaysia is a leading exporter of palm oil. US-China trade agreement may also have an impact on Malaysian export as China aims to increase imports from the US, including agro-products.

Last year, India and China were the largest buyers for Malaysian palm oil with an import volume of 4.4MMT and 2.5MMT, respectively. Indian traders will look for alternative import sources for domestic oil needs. Malaysian export of palm oil stood at 3.9MMT in the year 2019.

In the year 2018-2019, Indian export to Malaysia stood at $6.43billion. While import from Malaysia stood at $10.81billion. The restriction will also help India in reducing its trade deficit with Malaysia.

India’s refined palm oil import from Malaysia stood at $438.56million. Malaysia export $9.91billion of Palm oil. Among that, Indian import of crude and refined palm oil stood at $1.4billion.

The move has been seen in the backdrop of politically motivated comments made by Prime Minister of Malaysia. The relationship may further deteriorate if Malaysia continues its biased political position against India. Indian Government’s position reflects that Malaysia’s relationship with India cannot be based on Malaysia’s relationship with another country and misinformed opinions.


Presidential Election in Taiwan

Tsai Ing-wen of Democratic People’s Party (DPP) was re-elected for the second term in the Presidential elections held on 11 January this month.

Tsai Ing-wen got 57.1% of the vote. More than 8.17million people voted for Tsai’s second term. In 2016 elections, Tsai garnered 6,894,744 votes. Since its formation in 1986, this is the fourth presidential electoral victory for DPP after 2000, 2004 and 2016. Kuomintang or Chinese Nationalist Party (CNP) governed the Republic of China for the rest of the period. Kuomintang Presidential candidate Han Kuo-yu stood second in the electoral contest with 38% vote share.

In her victory speech, Tsai said that with every presidential election, People of Taiwan tell the world that they cherish the democratic way of life and their country. President Tsai stressed that democratic Taiwan and the elected government would not give in to threats and intimidation from Beijing.

The election registered 74.9 per cent voter turnout; 8 points higher than the previous election.

In 1999 at DPP’s national convention, the party adopted Resolution on Taiwan’s Future proclaiming that DPP recognises Taiwan as a sovereign nation and that any change to the ‘status quo’ has to be decided by Taiwanese voters via a referendum. The resolution also reaffirms DPP’s longstanding stance that “Taiwan is not part of the People’s Republic of China and that it is opposed to the ideas of ‘one China’ or ‘one country, two systems,’ as ‘unilaterally proposed by China,’ but would engage with China for economic cooperation. The resolution also aimed to expand Taiwan’s role in the international community, seeking international recognition, membership of the United Nations and other international organisations.

The Republic of China (ROC) joined the United Nations as a founding member on 24 October 1945. The Republic of China was also the members of the United Nations Security Council until 1971. The People Republic of China replaced ROC in the UN under the United Nations General Assembly Resolution 2758. The resolution recognised the People’s Republic of China (PRC) as the only representative of China to the United Nations. In 2009, The United Nations rejected Taiwan’s membership bid on the basis of resolution 2758.

Trade relations between two contries remain strong despite political differences. In 2017, the China-Taiwan trade value reached $139 billion. China is Taiwan’s largest trading partner ahead of ASEAN, US and Japan. Taiwan enjoys a trade surplus of $39 billion with China.

India’s trade with Taiwan remains on a lower side. Imports from Taiwan in 2018-19 stood at $4.57 billion (0.89% of India’s total import), while export stood at $2.60 billion (0.78% of India’s total export). Both India and Taiwan can benefit from higher trade volume. Business and economic cooperation will also improve people to people connect between India and Taiwan.

Geopolitical Viewpoint is an assessment of key geopolitical events with strategic consequences.

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