Global SITREP for Wednesday, 13 December 2023 – Forward Observer

Global SITREP for Wednesday, 13 December 2023

Good morning, and welcome to the Global Situation Report for Wednesday, 13 December 2023

  1. CHINA’S GLOBAL SECURITY INITIATIVE GAINS STEAM: Chinese President Xi Jinping’s Global Security Initiative (GSI), announced last year, has picked up support from over 100 countries, according to the country’s foreign ministry.
  • The GSI is China’s response to the U.S.-led sanctions regime against Russia. Xi launched the initiative in 2022 to provide an alternative to U.S. global leadership, and called for multilateral solutions to promote peace instead of unilateral actions, like sanctions, that promote war and East-West confrontation.
  • According to the Chinese foreign ministry, a “high-level” GSI conference is being planned.

Why It Matters: In a speech last year, Xi said that all countries are passengers on the same global ship, and that the United States, presumably as ship captain, is trying to throw countries off the ship – alluding to U.S. sanctions designed to destroy Russia. Enter the GSI, which is part of a larger Chinese effort to displace U.S. leadership around the world – much like the Shanghai Cooperation Organization (SCO) is attempting to displace U.S. diplomatic influence in Central Asia, the BRICS (Brazil, Russia, India, China, South Africa) economic alliance is attempting to displace U.S./Western economic influence, the Asian Infrastructure Investment Bank and New Development Bank are attempting to displace U.S./Western financial influence (like the World Bank and International Monetary Fund), and numerous security forums, like the Boao Forum during which Xi launched the GSI, are attempting to displace U.S. defense and security influence around the world. The GSI is the latest in a string of alternative institutions that compete with U.S./Western institutions and form the basis of a new Chinese world order. As Chinese Foreign Minister Wang Yi said last year, “Asia’s time has come in global governance.” – M.S.

  1. RUSSIA, NICARAGUA HOLD STRATEGIC TALKS: Russian and Nicaraguan officials met in Moscow today to discuss “further coordination” on the “strategic partnership” between the two countries.
  • Talks included a strategy to counter Western influence and “countering color revolutions.”

Why It Matters: Nicaragua is one of a few Russian footholds in the Western Hemisphere and last year authorized permanent party Russian troops to be deployed there. – M.S.

  1. SLOWING OIL DEMAND, INVESTORS DISMISS GEOPOLITICAL RISKS: Concerns about excess oil supply and slowing demand, despite heightened risks from Houthi attack on oil tankers, led to lower oil prices yesterday and more hedge fund bets that oil prices will remain lower.
  • “Sentiment remains negative. There is no help coming from the demand side of the oil equation. The fundamental backdrop is discouraging,” said Tamas Varga of oil broker PVM.
  • The Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency expect global oil demand growth to slow in 2024, but these groups don’t agree on the extent of the changes in demand.
  • Hedge funds haven’t been this pessimistic on oil since 2015/2016, betting that Saudi Arabia and OPEC cannot or will not again cut their production anytime soon to boost oil prices. 

Why It Matters: The U.S. remains the world’s top oil producer, and domestic oil production has continued to grow, according to U.S. Energy Information Administration (EIA) data through September. U.S. shale oil’s all-in production costs are about $70 per barrel compared to an estimated $5-6 all-in cost for Saudi Aramco, the Saudi Arabian state-owned oil company. This means Saudi Arabia can withstand lower oil prices for longer than U.S. shale oil companies. Hedge funds may be right in the short-term about no more OPEC production cuts, but if Saudi Arabia bankrupts some U.S. shale companies and gains greater global market share, then the Saudis could, once again, cut production and send oil prices higher. – H.B.

  1. FRENCH FRIGATE ATTACKED IN THE RED SEA:A French frigate downed two Houthi-launched drones attacking it in the Red Sea, according to French Armed Forces Minister Sébastien Lecornu.
  • “And this is how this weekend, two drones coming from Yemen deliberately targeted, according to us, our multi-mission frigate Languedoc, which was carrying out a patrol in the Red Sea,” Lecornu said in his address to the French Senate.
  • This marks the first direct attack on a Western nation and the first combat usage of the Aster 15 surface-to-air missile.

Why It Matters: As a direct attack on a Western nation, this risks a much larger response from the West. Israel announced it will be sending one of its most advanced corvettes to the Red Sea as well. A Norwegian oil tanker was struck by a missile this week. This conflict is rapidly expanding into the Red Sea, which carries about 10% of daily global trade. Expect disruptions and delays in the coming months. – J.V.

  1. CHINA TO FUND NEW “HISTORIC” ECONOMIC PARTNERSHIP WITH MALI: Mali’s Foreign Affairs Minister Abdoulaye Diop announced that China will fund major hydroelectric and solar power projects, a gold refining facility, and transportation network in Mali.
  • Officials are heralding Chinese involvement as a “relaunch of technical and financial cooperation” with China, which will “strengthen our country’s capabilities and… meet all our security needs.”

Why It Matters: Mali ejected the French military last year and brought in Russia’s Wagner mercenary group to battle the country’s Islamic insurgency, while observers widely expected China to become the country’s new patron state. China earlier this year donated military vehicles and equipment to Mali, in what’s become a string of economic and security support to remake the diplomatic balance of power across the region. Maybe more importantly, China is encroaching into Russia’s sphere of influence in the region and signaling that China, not Russia, is the senior partner in the China-Russia “no limits” alliance. – M.S.

THAT’S A WRAP: This does it for today’s edition. Thank you for reading. If you know folks who would also like to receive this email, would you please forward it to them? We appreciate you spreading the word. – M.S.

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