Finance Analyst
Commodities, the tangible assets that prop up our everyday existence, are experiencing a shake-up in nation-states' approaches to warfare. This shift is driven by new doctrines such as Hybrid Warfare or Unrestricted Warfare, which are taking centre-stage in conflicts that do not involve a uniform enemy or in situations where direct on-the-ground warfare is not an option. This Grey Zone has been used as a catch-all term to encompass the areas of warfare that nation-states have engaged in to compromise geopolitical rivals, be that through cyber security, political engineering, economic coercion, or the use of proxy wars.
The economic coercion utilised by actors has previously been relegated to macroeconomic measures such as tariffs, embargos, and resource-specific bans on exports. We have recently seen US-China relations hampered by the strategic imposition of bans on semiconductor production. However, a recent Bloomberg report has highlighted that the new Huawei Mate 60 Pro has possibly evaded US sanctions by incorporating South Korean memory chip provider SK Hynix’s LPDDR5 and NAND flash memory products. The new age of economic coercion has seen the rise of commodity manipulation to destabilise regions; we witnessed this after the detachment of Russian natural gas into Europe saw asymmetrical price rises in energy and cost-of-living crises compounded by Covid-era monetary policy.
These developments showcase the impracticality of large-scale sanctions in integrated global supply chains. To gain a deeper understanding of this new reality, we will explore how grain has been used as a geopolitical football in Ukraine with the Black Sea Grain Deal, Namibia’s discovery of the largest deep-sea oil well to date, and finally how climate change is changing how Eurasian states view mineral-mining operations in the Arctic circle.
“Making a thriller from grain”
These comments were uttered by Ukrainian President Volodymyr Zelensky in his address at the UN General Assembly on the 19th of September 2023. His comments unleashed a storm of political tensions, as Eastern European members have recently sought to extend protectionist policies to ban the domestic sale of Ukrainian wheat to protect domestic farmers. Poland has especially been impacted by the surplus of these imports as the Black Sea Grain Initiative and several land routes for circumventing the Russian blockade of Ukrainian ports have caused leaks into domestic markets.
This is an exemplary case study of the role commodity markets can play in the new age of unrestricted warfare, and the subsequent tensions that can arise. Polish Prime Minister Mateusz Morawiecki, not to be confused with the President of Poland Andrzej Duda, has stated that “we are no longer transferring weapons to Ukraine because we are now arming Poland with more modern weapons”. However, the President later clarified this ban would be restricted to new Western kits to replace the equipment sent to arm Ukraine. Economic realities, and the geopolitical football of grain, have undeniably been beneficial for Russia’s military leadership and showcase the extent unrestricted warfare can produce material changes on the battlefield.
Rise of African Commodities Markets
Looking away from Europe, last year TotalEnergies SE and Shell plc announced what some have touted as the world’s biggest-ever deep-water oil find in Namibia. The estimated 11-billion barrel find has generated substantial excitement in the nation of 2.7 million people. And sets the stage for a new theatre of unrestricted warfare as the United States of America and China compete for investment opportunities and strategic partnerships in an increasingly bi-polar world.
The dichotomy between American and French-listed companies financing these projects alongside integral Chinese investment into the nation, being the largest source of FDI and second largest trading partner of the country, presents inflexion points with growing tensions and looming elections in the US. The nation has also become a strategically sensitive flashpoint for the CCP, representing the largest Chinese investment in the continent with the nation’s Husab Uranium mine valued at over $5bn USD. This recent discovery of oil will now turn heads in Washington, as the US seeks to secure energy supplies and replenish the Strategic Petroleum Reserve (SPR) which was unloaded to artificially lower oil prices before the US mid-term elections. Seeing the SPR fall to its lowest level since 1984 in November of last year, and the surging oil prices, reaching $95 per barrel (the highest rate in 13 months), following cuts in production from Saudi Arabia and Russia, is increasing pressure in a Washington without the luxury of greater deficit spending.
Some argue that Africa is the region that will provide investors with the greatest returns over the next 100 years. The voluntary carbon credit markets present an opportunity to commodify Africa’s natural carbon sinks utilising sustainable methods, which will encourage investment and domestic economic empowerment. Recent developments within the continent such as the African Carbon Market Initiative (ACMI) launched at COP27 present the forefront of sustainable finance solutions available to African partners and seek to produce 300 million carbon credits annually by 2030, and 1.5bn credits annually by 2050. For financing projects in Africa, the global dominance of the introduction of the ACMI would represent $120bn USD and support over 110 million jobs across the continent. However, the rise of the continent, and the subsequent investment opportunities it represents, will only fuel geopolitical strife as superpowers seek increasingly protectionist policies and leave resource-rich African nations in the heart of the turmoil to militarised global supply chains.
Topic 3: Climate Change
Finally, a fascinating aspect of climate change is the different perspectives geopolitical actors have on warming global temperatures. We will focus on the Arctic, particularly how climate change is driving the “Arctic opening”, giving rise to new shipping and trade routes and subsequent geopolitical tensions.
Warming three times faster than the rest of the globe, the Arctic Circle represents a large surplus in mineral revenues for nations historically without access to this region of the world. Russia, with the permeance of a North Sea trade route, would see not only military access for defence operations, but also an influx of new trade opportunities. The shortened distance between Europe and Asia would take trade away from the Suez or Panama Canal, directly into Russian ports. Economically, the Arctic opening not only opens the door to mineral mining such as nickel, platinum, and palladium, all crucial components in Hydrogen storage and jet engine production, but also access to an area believed to contain 30% of the globe's undiscovered gas and 13% (90bn barrels) undiscovered oil.
Furthermore, the geopolitical sensitivity of the situation was highlighted with Norway proposing the opening of an area roughly the size of Germany to deep-sea mining in the circle. Their proposal specified areas rich in copper, nickel, and cobalt all materials commonly used in batteries and electric vehicles. Justifying the proposal through their necessity in the energy transition. This raises interesting questions about how nations can navigate the delicate equilibrium, as warfare undergoes a transformation that now encompasses every facet of the economy and influence at their disposal. Even those states that can’t afford to put themselves at a military disadvantage recognise the benefits of a thawing Arctic and are cautious about jeopardizing their access to these vital resources.
Conclusion
This article sheds light on the evolving landscape of warfare and geopolitical strategies in the modern world, highlighting the weaponisation of commodities. In this new era of unrestricted warfare, it is evident that traditional military conflicts are just one facet of a multifaceted strategy. The weaponisation of commodities, whether through economic coercion or resource control, has become a crucial tool in the arsenals of nation-states. These developments underscore the need for a more nuanced understanding of modern geopolitical dynamics and the various dimensions of conflict beyond the traditional battlefield. As nations adapt to this changing landscape, the role of commodities in shaping international relations is likely to continue evolving, with far-reaching implications for global stability and security.
Comments