Confluence Consultants

The Airbus and Boeing duopoly has governed the aircraft manufacturing industry for several years. Changing these dynamics seems unimaginable- but could there be a 'new(ish) kid on the block' who could change the aircraft manufacturing industry? Both Airbus and Boeing have been facing supply chain disruptions. But this has perhaps been a harder time for Boeing, racked with large losses and the 737 Max scandal and penalty payout. Could China be the one to break this duopoly? If ever there was a time for a new market entrant, it is now. Airbus and Boeing orders have slipped from thousands to a mere few hundreds in 2024 (as per data available till 30th July), with both manufacturers warning airlines of delivery delays. Meanwhile, China's COMAC has also built up an order base in the hundreds- comparable to Airbus and Boeing. Can China also make a substantial dent in the aviation manufacturing industry? Perhaps not for years. But it does shake up the industry for Airbus and Boeing and perhaps provide an entry point for other aspirants. Read on to find out how. Amandeep Kaur Ahuja Shraddha Bhandari Vyom Veer Singh Nagar

𝘈 𝘕𝘦𝘸 𝘍𝘳𝘰𝘯𝘵 𝘪𝘯 𝘵𝘩𝘦 𝘐𝘴𝘳𝘢𝘦𝘭-𝘏𝘢𝘮𝘢𝘴 𝘊𝘰𝘯𝘧𝘭𝘪𝘤𝘵? 🤔 The recent killing of three Israeli civilian guards at the Allenby/King Hussein Bridge has fueled fears of a new front for PM Netanyahu to juggle, alongside Gaza, Lebanon, Golan Heights and the Red Sea- this time in Jordan. 🎯 While Jordan and Israel have faced ongoing political tensions despite the peace treaty of 1994, escalation of tensions has not been in the interest of either parties. 🎯 Israel relies on Jordan to provide a buffer against anti-Israeli attacks in the region. This allows the 310 km shared border between the two states to function in relative peace in the absence of border patrol. 🎯 Jordan, in turn, relies on Israel for gas and water supply. 🎯 Investigations are ongoing to assess if the perpetrator of the guards’ killing acted alone or as part of a network. 🎯 Authorities have also already arrested four Jordanians setting up an explosives lab, and intercepted a shipment of explosives headed to the West Bank. 🎯 Half the population of Jordan is originally Palestinian with 2.4 million refugees in the country. The ongoing fighting in Gaza has the potential to stir extremism within the community. 🎯 With ceasefire negotiations at a stalemate, increased raids in the West Bank, and ongoing settler violence, the geographic proximity of Jordan to the action makes it a vulnerable spot in the conflict. 🎯 For both Jordanian and Israeli officials, monitoring this hotspot, curbing any opportunities for more violence and thwarting the rise of a brand new front could be a priority. Image Source: Times of Israel #gcc #macro #riskanalysis #israel #hamas Amandeep Kaur Ahuja Vyom Veer Singh Nagar Shraddha Bhandari

𝘐𝘯𝘥𝘪𝘢’𝘴 𝘚𝘵𝘳𝘢𝘵𝘦𝘨𝘪𝘤 𝘋𝘦𝘧𝘦𝘯𝘤𝘦 𝘔𝘢𝘯𝘰𝘦𝘶𝘷𝘳𝘦 Last week it was Japan. This week, it’s India changing its traditional defence stance to face the region’s geopolitical strains. A second homegrown ballistic submarine joins its navy for effective retaliation in case of a nuclear attack. India is in close geographic proximity to nuclear states China and Pakistan, and is surrounded by Bangladesh, Sri Lanka, and the Maldives- states under heavy Chinese influence. Its alignment with the US, Japan, and Australia through the Quadrilateral Security Dialogue (Quad) is, therefore, no surprise. This latest addition to the navy does not cover the gap between the Indian and Chinese navy strength- but it does change the regional dynamics of security. India’s allegiance to the ‘No First Use’ doctrine remains intact. However, the navy addition and alignment with the Quad showcases its significant deterrence and second strike capabilities. 𝘛𝘩𝘦 𝘛𝘦𝘤𝘩𝘯𝘰𝘭𝘰𝘨𝘺 𝘗𝘢𝘨𝘦𝘢𝘯𝘵 The global technology race has come to resemble a pageant with various competitions. In the smartphone competition we have Huawei and Apple competing for top spot as both prepare to unveil new smartphones in October. In the semiconductor competition, India comes in as a surprise entry with subsidies worth $10bn. Meanwhile, the US and Japan are teaming up through collaborations between Nvidia and Sakana AI, and the Japanese Research Institute pairing with Intel to develop a R&D centre in Japan. Vietnam is also drawing up a list of perks it intends to offer investors in its chip industry. All eyes are glued to this tech pageant. Who will take the final cake, and can we expect surprise entries to swoop in? 𝘊𝘩𝘪𝘯𝘢’𝘴 𝘉𝘢𝘣𝘺 𝘚𝘵𝘦𝘱𝘴 𝘪𝘯 𝘈𝘧𝘳𝘪𝘤𝘢 China’s aims to enhance its influence across Africa are not impeded by its domestic economic troubles. In the China-Africa summit on the 5th of September, President Xi Jinping pledged support for development projects through smaller loans. China has committed $51bn over 4 years (including loans and fresh investment) and support for 30 clean energy and 30 infrastructure projects. The latter would also include a network to build land and sea links between China and Africa. This comes at a time when other countries have also extended invitations to African states for summits to encourage collaboration. Turkey, Saudi Arabia, and South Korea are mid-powers vying for influence across Africa. China, faced with tariffs and sanctions in the West, and an ailing domestic economy, now appears to be doubling down on efforts to counter other players in Africa, and revive its influence across the continent. Smaller loans to Africa could help it achieve its goal of supporting African infrastructure without burdening their ongoing debt problems and reducing pressure on its own investment expenditure. #macro #riskanalysis #superpowerrivalry Image Source: South China Morning Post

🇫🇷 𝘍𝘳𝘢𝘯𝘤𝘦 𝘢𝘯𝘥 𝘎𝘦𝘳𝘮𝘢𝘯𝘺: 𝘙𝘪𝘨𝘩𝘵 𝘏𝘦𝘳𝘦, 𝘙𝘪𝘨𝘩𝘵 𝘕𝘰𝘸 🇩🇪 Europe is gripped by a right-wing ideological swing. In Croatia, Finland, Hungary, Italy, the Netherlands, Slovakia, and Sweden, parties leaning towards the right enjoy considerable support. And now, electoral outcomes in France and Germany are adding to this shift. 𝘍𝘳𝘢𝘯𝘤𝘦: Following the snap election in July that led to a hung parliament, President Macron announced a new PM to end the political deadlock in France. Traditional, Conservative Michel Barnier is set to replace left-wing Gabriel Attal, in what appears to be an ideological shift to appease the right-wing National Rally Alliance, who gained 24% of the votes in July. 𝘎𝘦𝘳𝘮𝘢𝘯𝘺: In the German regional elections in Thuringia and Saxony, the right-wing Alternative for Germany (AfD) party soared to prominence for the first time since WWII with over 30% of the votes in both states. 𝘞𝘩𝘢𝘵 𝘋𝘰𝘦𝘴 𝘵𝘩𝘪𝘴 𝘔𝘦𝘢𝘯 𝘧𝘰𝘳 𝘍𝘳𝘢𝘯𝘤𝘦, 𝘎𝘦𝘳𝘮𝘢𝘯𝘺 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘌𝘜? Despite wins for the right-wing, the governing coalitions in both countries are comprised of the left/centre, applying pressure on both governments. In Germany, the governing parties achieved less than 15% of the votes in the regional election. With a General Election approaching in September 2025, re-election could prove to be a challenge for the Chancellor. The pressure is also high for President Macron and the new PM, who is now tasked with drafting a new budget under the EU guidelines of cuts worth €30 bn. Should cuts add to the French woes, the next leadership election in 2027 could make a decisive turn towards the right. Where France and Germany might have led the European Union, the right wing shift in both countries adds to the polarisation in the region in three key areas: 1. Russia-Ukraine Conflict- the German AfD is sceptical of military aid to Ukraine, a sentiment shared by other right-wing parties in the region. The EU’s aid to Ukraine cannot be guaranteed if a key player like Germany is not on board. This could affect the regional security dynamics. 2. Climate crisis- far right parties are also climate sceptic. A surge in right wing prominence could slow EU-level climate action, potentially also impacting global action.  3. Refugee Crisis- The EU is set to act promptly on the movement of asylum seekers who do not qualify to stay in Europe. However, countries like Hungary refuse to contribute financially to the cost of the movement. Should this become the norm across other countries as well, the refugee crisis could worsen. Ideological swings are known to be cyclical in nature: Poland and Spain reversed the rise of the right. So, will the rise of the right in Germany and France be further cemented through the potential victory of Presidential hopeful Donald Trump in the US? Or will upcoming elections in other German states tell a different story? #macro #riskanalysis #geopolitics

🇵🇸 𝘊𝘩𝘢𝘰𝘴 𝘙𝘦𝘪𝘨𝘯𝘴 𝘪𝘯 𝘵𝘩𝘦 𝘔𝘪𝘥𝘥𝘭𝘦 𝘌𝘢𝘴𝘵 🇮🇱 Last week, a Houthi attack on the Greek oil tanker Sounion raised global concerns over a potential oil spill. This week, two more tankers from Saudi Arabia and Panama were attacked in the Red Sea. In Israel, the discovery of six hostages' bodies captured by Hamas on October 7th has plunged PM Netanyahu's political career into crisis. Strikes and protests in Tel Aviv demand his resignation while uncertainty looms over a possible ceasefire and hostage deal. While the PM has prioritised capturing Hamas leader Yahya Sinwar, it appears that without a resolution to the hostage situation, domestic unrest in Israel is likely to persist. 🇶🇦 𝘈𝘤𝘲𝘶𝘪𝘴𝘪𝘵𝘪𝘰𝘯𝘴 𝘎𝘢𝘭𝘰𝘳𝘦 𝘪𝘯 𝘵𝘩𝘦 𝘎𝘊𝘊 🇦🇪 In the GCC, the focus is on expanding global influence through strategic acquisitions. The UAE's DP World acquired Hong Kong's logistics firm Cargo Services Far East Ltd. Through the firm’s service lines, it will extend its reach into the US, UK, Europe, South Africa, New Zealand, and Australia. Similarly, Abu Dhabi's Agro-Food Enterprise Invictus purchased a flour milling company in Southern Africa, aligning with the UAE’s global sector-targeting strategy. Meanwhile, Qatar may benefit from Russia's setbacks, as reported talks suggest Qatar Investment Authority’s acquisition of Russian Rosneft's stake in Germany's PCK Schwedt oil refinery. As global geopolitical tensions rise, the GCC continues to leverage its neutral stance to maximise opportunities across East and West. 🇹🇷 👋 🇪🇺 𝘌𝘷𝘦𝘳𝘺𝘣𝘰𝘥𝘺 𝘓𝘰𝘷𝘦𝘴 𝘉𝘙𝘐𝘊𝘚 Moving on from its failed negotiations with the EU, Turkiye is now bidding to join BRICS. Turkiye’s membership in BRICS could make it a key mid-power with powerful allies. It is an ‘ally’ of China and Russia, and a NATO member, placing it in the neutral sweet spot between East and West. Could this membership also help with Turkiye’s economic revival? In Q2 2024, GDP growth was 2.5%, below the projected 5.3% (based on TurkStat data), with a 50% interest rate pressuring businesses and households. How BRICS membership will impact economic growth is still uncertain. Another BRICS member in the limelight is the UAE. A year after its membership was announced, it aims to embark upon “strategic, sustainable alliances.” For China and India, it is a key crude oil partner. ADNOC has entered various Joint Ventures for China’s downstream sector. For South Africa, UAE’s Masdar is a key renewables partner in wind and solar energy. While these alliances position the UAE advantageously, the economic outcomes are not always favourable for all parties. For instance, India’s imports of precious metals under its CEPA with the UAE have deepened its trade deficit, leading to possible renegotiations. So, while such partnerships can strengthen relations, the economic impacts may vary, creating winners and losers. #gcc #macro #riskanalysis Image: Getty Images/Al Monitor

🚘 𝘛𝘩𝘦 𝘎𝘳𝘦𝘦𝘯 𝘝𝘦𝘩𝘪𝘤𝘭𝘦 𝘚𝘩𝘰𝘸𝘥𝘰𝘸𝘯 Japan’s Toyota and Germany’s BMW are set to team up to produce fuel-cell vehicles. These run on power generated by the reaction of hydrogen and oxygen. The only waste product is water, which deems this as ‘the ultimate eco-friendly vehicle’. Meanwhile, in China, Xpeng has produced a $22,000 EV with self-driving features, challenging not just the likes of Tesla and European brands, but also locally produced BYD vehicles in a price war. While demand for EVs has been slow, a market with a wider variety of products could help boost the demand. The question remains- who will win this round? 🇨🇳 𝘛𝘩𝘦 𝘊𝘩𝘪𝘯𝘦𝘴𝘦 𝘌𝘤𝘰𝘯𝘰𝘮𝘺- 𝘋𝘶𝘢𝘭 𝘚𝘪𝘥𝘦𝘴 𝘰𝘧 𝘵𝘩𝘦 𝘚𝘢𝘮𝘦 𝘊𝘰𝘪𝘯? The Chinese economic story seems to be recounting different versions on the international and domestic stages. Internationally, reports in the past week indicate an 8-year high for steel exports, reaching 100mn tonnes. However, this has come at the cost of plummeting domestic demand and low prices, which have reduced profitability for 99% of steel mills in the country. Reports also indicate that China leads globally in at least 90% of technology, including advanced robotics and autonomous systems operation technology. It is only three years behind in catching up with Taiwan’s TSMC, the largest semiconductor manufacturer in the world. It has also captured majority shares of global renewable energy efforts. Eg: Over 97% of solar plants deployed in the EU are imported from China. However, the continued sluggish domestic demand has prompted a funds sell-off in metals. How long can the Chinese economy endure this duality of its international and domestic standing? 🇯🇵 𝘑𝘢𝘱𝘢𝘯 𝘚𝘵𝘦𝘱𝘴 𝘜𝘱 𝘋𝘦𝘧𝘦𝘯𝘤𝘦  In what has been deemed as the biggest shift in defence policy since WWII, Japan has intensified its focus on enhancing military capabilities. It has signed off on a $59bn defence budget to enhance AI capabilities, automation, and improve troop conditions. This is largely aimed at addressing the recruitment shortfall it has been experiencing. Another focus is on developing uncrewed ground, air, and sea weapons systems, and counter strike capabilities with long-range missiles. It also seeks to develop a network of satellites to detect the hypersonic missiles known to be tested by North Korea, Russia, and China. Japan’s increased expenditure follows the global defence spending trajectory, which jumped 6.8% in 2024 compared to 2022. But given its tricky geographic location, could Japan’s move spark an arms race and potentially disturb the security landscape in the region? #macro #riskanalysis #deeptech Amandeep Kaur Ahuja Vyom Veer Singh Nagar Shraddha Bhandari 𝘐𝘮𝘢𝘨𝘦 𝘚𝘰𝘶𝘳𝘤𝘦: 𝘈𝘴𝘪𝘢 𝘗𝘢𝘤𝘪𝘧𝘪𝘤 𝘋𝘦𝘧𝘦𝘯𝘤𝘦 𝘙𝘦𝘱𝘰𝘳𝘵𝘦𝘳

🌍 𝑻𝒉𝒆 𝑻𝒖𝒓𝒃𝒖𝒍𝒆𝒏𝒕 𝑯𝒐𝒓𝒏 𝒐𝒇 𝑨𝒇𝒓𝒊𝒄𝒂 The deepening dispute between Ethiopia and Somalia is the latest disturbance in the turbulence-ridden Horn of Africa. 👉 Earlier this year, Ethiopia and Somaliland (the unrecognised, breakaway state originally part of Somalia), signed a Memorandum of Understanding, which Somalia considered a breach of their sovereignty. This would give land-locked Ethiopia access to the Red Sea through Somaliland’s coastline in exchange for recognition of the latter’s sovereignty. 👉 Somaliland would acquire a 30% stake in one of Ethiopia’s main institutions such as Ethiopian Airlines or the disputed Grand Ethiopian Renaissance Dam (GERD). 👉 Somalia describes this agreement as illegal and a potential breach of Somalia’s territorial integrity. It has threatened to expel the Ethiopian ambassador and troops stationed to battle Islamist militants. 𝘌𝘯𝘵𝘦𝘳 𝘛𝘶𝘳𝘬𝘦𝘺 𝘢𝘯𝘥 𝘌𝘨𝘺𝘱𝘵 𝘰𝘯 𝘵𝘩𝘦 𝘴𝘪𝘥𝘦 𝘰𝘧 𝘚𝘰𝘮𝘢𝘭𝘪𝘢 👉 Through 2024, both Turkey and Egypt have signed defence and economic agreements with Somalia. 👉 Turkey will protect Somalia’s sea assets, and retrain their navy for the protection of its waters against illegal fishing in exchange for 30% revenue from Somalia’s Exclusive Economic Zone. Turkey also acquired the rights for oil exploration in Somali territory in March. 👉 Meanwhile, in mid-August, Egypt and Somalia entered a military cooperation agreement, and is now sending 10,000 troops to Somalia. 𝘞𝘩𝘢𝘵 𝘥𝘰𝘦𝘴 𝘵𝘩𝘪𝘴 𝘮𝘦𝘢𝘯 𝘧𝘰𝘳 𝘵𝘩𝘦 𝘳𝘦𝘨𝘪𝘰𝘯? 👉 Turkey’s infrastructure investments in Somalia through the years and strong trade and investment relations with Ethiopia have positioned it as a strong economic influence. Attempts at brokering peace talks have also placed it as a diplomatic intermediary in the region, filling the mediation gaps left behind in the past by the US, Russia and France. 👉 Meanwhile, Egypt and Ethiopia’s relations worsened in 2019 due to the construction of Ethiopia’s GERD. The dam draws water from the Blue Nile, the source of the Nile, making it a cause of concern for Egypt.   For Ethiopia, pressure from both countries to make concessions in the port deal could weaken its case for access to the Red Sea and related economic opportunities. 👉 For Egypt, the 10,000-strong presence in Somalia is a projection of power that could cement its strength in the region. It would also preserve the security that the Nile and the Red Sea/Suez Canal provide. The latter has already been subject to the impact of the conflict in Gaza. 👉 Turkey and Egypt also renewed ties in March and are expected to meet in September. Could their combined diplomatic and military power appease the situation, or could the Horn of Africa be another front for the global conflict we are witnessing today? #riskanalysis #macro #geopolitics #mena Amandeep Kaur Ahuja Shraddha Bhandari Vyom Veer Singh Nagar

𝐆𝐮𝐧𝐬, 𝐅𝐮𝐧𝐝𝐬, 𝐚𝐧𝐝 𝐈𝐧𝐭𝐞𝐫𝐧𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐌𝐢𝐬𝐬𝐢𝐨𝐧𝐬 On the surface of the conflict, Israel and Hezbollah exchanged fire without a spillover in the region and ceasefire talks renewed in Doha. A fund was also set up for the Bank of Palestine in partnership with the International Finance Corporation (part of the World Bank) and the EBRD. It aims at enhancing capital in Palestine for post-war recovery alongside fostering financial inclusion and socio-economic development. However, these developments took place against the backdrop of a raid in the West Bank that killed at least 9 civilians. The mandate for peacekeeping forces in Southern Lebanon was also renewed through a unanimous UNSC resolution, signalling the continuing need for international intervention on the Israel-Lebanon border. So while prospects and preparedness for a postwar world may have been put in place, the timeline of peace remains uncertain. 𝐆𝐮𝐥𝐟 “𝐂𝐨𝐥𝐥𝐚𝐛𝐨𝐫𝐚𝐭𝐢𝐨𝐧” 𝐂𝐨𝐮𝐧𝐜𝐢𝐥 States in the GCC have been engaging in collaborative efforts to keep the momentum of their positive economic results up. In the UAE, Mubadala invested in the data centre developer Yondr, its third data centre investment. It also invested in UCB Pharma’s China unit with a view to expand its medical technology portfolio. In KSA, PIF is preparing to acquire a 15% stake in Pakistan’s copper-gold mine. This aligns with KSA’s broader objective to increase its use and access of minerals. Infrastructure projects linked to Vision 2030 are expected to be copper intensive and domestic copper demand is expected to increase by 3.7% annually. Qatar and Kuwait have also entered into a 15-year LNG supply deal, owing to Kuwait’s increased demand for power, uplifting Qatar’s energy revenue. 𝐓𝐮𝐫𝐤𝐢𝐬𝐡 𝐃𝐞𝐥𝐢𝐠𝐡𝐭𝐬 𝐃𝐨𝐰𝐧 𝐢𝐧 𝐀𝐟𝐫𝐢𝐜𝐚 Turkish presence is set to challenge superpower influence over Africa. Disillusioned by the failures of US, Russian and Chinese presence in the continent, African states are increasingly turning to mid-powers like Turkey for economic and diplomatic solutions. From President Erdogan mediating talks between Ethiopia and Somalia, to Turkish companies managing African ports and airports, Turkey’s clout is increasing. Turkey is also eyeing nuclear opportunities in Niger. Meanwhile, in June, French nuclear company Orano lost its licence to operate in Niger- an example of mid-powers capitalising on the mistakes of Western countries in Africa. How Turkey and other mid-powers like the UAE will expand their clout in the region could determine the future of global geopolitical influence. #riskanalysis #macro #gcc Amandeep Kaur Ahuja Vyom Veer Singh Nagar Shraddha Bhandari Image: Gabriella Turrisi/G Zero

𝑻𝒉𝒆 𝑮𝑪𝑪 𝑪𝒂𝒖𝒍𝒅𝒓𝒐𝒏: 𝑾𝒉𝒆𝒓𝒆 𝑩𝒖𝒔𝒊𝒏𝒆𝒔𝒔 𝒊𝒔 𝑩𝒐𝒐𝒎𝒊𝒏𝒈 𝒂𝒏𝒅 𝑮𝒆𝒐𝒑𝒐𝒍𝒊𝒕𝒊𝒄𝒔 𝒊𝒔 𝑩𝒐𝒊𝒍𝒊𝒏𝒈 The economic activity in GCC states like Saudi Arabia and the UAE sets them apart from the Middle Eastern stereotype of a conflict zone. In H1 '24, the UAE’s non-oil foreign trade reached AED1.395 trillion and in KSA, non-oil exports rose by 10.5% YoY in Q2 ‘24. 𝘏𝘰𝘸𝘦𝘷𝘦𝘳, 𝘵𝘩𝘦 𝘳𝘦𝘨𝘪𝘰𝘯 𝘤𝘰𝘯𝘵𝘪𝘯𝘶𝘦𝘴 𝘵𝘰 𝘣𝘦 𝘢𝘧𝘧𝘭𝘪𝘤𝘵𝘦𝘥 𝘸𝘪𝘵𝘩 𝘨𝘦𝘰𝘱𝘰𝘭𝘪𝘵𝘪𝘤𝘢𝘭 𝘩𝘦𝘢𝘥𝘸𝘪𝘯𝘥𝘴 𝘵𝘩𝘢𝘵 𝘱𝘰𝘴𝘦 𝘣𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘳𝘪𝘴𝘬𝘴. 𝐄𝐬𝐜𝐚𝐥𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐈𝐬𝐫𝐚𝐞𝐥-𝐇𝐚𝐦𝐚𝐬 𝐂𝐨𝐧𝐟𝐥𝐢𝐜𝐭 The ongoing Israel-Hamas conflict continues to threaten regional stability and its attractiveness for foreign investment. It also curtails the normalisation of relations between the UAE/KSA and Israel. Since the conflict, UAE-Israel trade has cooled- from growth of 17% in 2023 to that of 7% in Q1 ‘24 YoY- despite a CEPA between the two countries. Red Sea disruptions have also affected GCC shipping. DP World has faced a 1.9% reduction in MENA container capacity, while Oman’s Port of Salalah reported a 16% decline. Disruptions are expected to continue into Q3 ‘24. For businesses in the region, shipping remains a critical area to navigate. 𝐒𝐮𝐩𝐞𝐫𝐩𝐨𝐰𝐞𝐫 𝐑𝐢𝐯𝐚𝐥𝐫𝐲 The rivalry between the US and China manifests itself through competition in GCC investment, especially across deep technology. Chinese companies and funds have a stake in the world’s largest solar projects in Mohammed bin Rashid Al Maktoum Solar Park and Noor Abu Dhabi solar plant, and in KSA’s prime Renewable Energy company ACWA. On the other hand, Abu Dhabi’s G42 sold its Chinese stakes in order to secure Microsoft’s $1.5bn investment. KSA’s King Abdullah University of Science and Technology is also collaborating with Google for AI research. The exchange of investment and knowledge is prevalent with both key partners, and balancing interests with them both is key to optimising returns from both relations.  𝐈𝐧𝐜𝐨𝐧𝐬𝐢𝐬𝐭𝐞𝐧𝐭 𝐎𝐢𝐥 𝐏𝐫𝐢𝐜𝐞𝐬 The price of oil is impacted by significant geopolitical incidents and reduced Chinese demand. KSA’s oil sales dropped to a 3-year low in June 2024, causing revenue-dependent projects to be delayed. Libya’s recent output cuts caused a 3% spike in the price of oil, but OPEC+ is due to make a decision on whether planned production cuts until 2025 will stay in place or be revised. The volatility of the market remains a key consideration for the GCC. 𝐔𝐒 𝐑𝐚𝐭𝐞 𝐂𝐮𝐭𝐬 US interest rate changes are mirrored by GCC banks to maintain the currency peg. The GCC financial sector has been strong in 2024 but a rate reduction would likely impact profitability. GCC banks must remain vigilant to interest rate shifts, often countered by shifting deposits to less rate-sensitive instruments. If you are a business in the GCC, let us know how you navigate these geopolitical risks.

Should all eyes be on the Indo-Pacific Escalation? Russia-Ukraine, Israel-Palestine, and Bangladesh, while more newsworthy, seem like moves towards the final game of chess between the US and China and their allies in the Indo-Pacific. Some recent developments: 1.⁠ ⁠A recent report indicates that the Chinese military spending in 2022 was way more than their stated $229 Billion- closer in real terms to $711 billion, nearly equal to the US defence budget in the same year. 2.⁠ ⁠While the US defence forces are superior- they are stretched thin around the world, whereas the Chinese are concentrated in their ‘Near East.’ 3.⁠ ⁠The Chinese have steadily worked on unconventional methods—cyberattacks, jammers, salami-slicing strategies—to augment their not-so-battle-ready forces. 4.⁠ China outweighs the defence expenditure of the US’s Indo-Pacific allies by 5:1, becoming the biggest military spender in the region. While the US defense budgets have stagnated, the Chinese now have the world’s largest navy, army and ground-based rocket force. The US seems to be aware of these maneuvers, but can they prepare effectively and in time: 1.⁠ ⁠The US has key strengths: its forces are battle-trained, its satellites monitor the globe, and its allies (including India) surround China. Right now, everyone is teetering between the two superpowers. But when the whips crack, the allegiances of most Asian countries towards the US will be clear. 2.⁠ ⁠NATO is returning to the Indo-Pacific. The German navy recently embarked upon an Indo-Pacific deployment soon after a rotation around the Red Sea, the first series of deployments since the end of World War II. Deals are being struck across the region, including the AUKUS submarine deal with the UK and Australia and the Quad Security Dialogue with India and Japan. 3.⁠ The ⁠US has effectively weakened one of China’s key allies, Russia. For all the gung-ho about the Russian economy growing and oil production stabilizing, Russia is mired in a war it cannot win or be distracted from. 4.⁠ ⁠Major conflicts in the Middle East seem to be nearing resolution. This does not mean that countries will stabilize overnight or that Iran and Israel will become best friends. However, tensions should ease enough for the US to shift its focus and assets from the region. United States Central Command (CENTCOM) is giving way to Indo-Pacific Command, with renewed amphibious training (training for island wars), strengthened base defenses and renewal of/new security pacts. The big question remains: What will the next moves be in the US-China rivalry—Myanmar, Taiwan, tech battles, sanctions, or something else? Will the US effectively contain China, will China rise as the new superpower, or will a multipolar world emerge? I look forward to hearing your thoughts. #geopolitics #Middleeast #IndoPacific Confluence Consultants Amandeep Kaur Ahuja Vyom Veer Singh Nagar