This week, Ukraine continued to advance into Russian territory in Kursk and near Belgorod and agreed to a prisoner exchange with Russia. In the Middle East, Israel expanded its focus into the West Bank and exchanged cross-border strikes with Hezbollah in both Lebanon and Syria. In the Indo-Pacific, U.S. National Security Advisor Jake Sullivan met with government officials in Beijing in an effort to de-escalate bilateral tensions, while a Chinese reconnaissance plane flew into Japanese airspace.
Weekly Forecast Monitor: Aug. 30, 2024
The Geopolitical Hotspots Monitor examines the outlook for key geopolitical hotspots around the world.
1 Russia/Ukraine Conflict
Summary
The Russia-Ukraine conflict trended toward military escalation and diplomatic de-escalation scenarios as Ukraine expanded its incursion into Russia’s Kursk region and attacked border posts near Belgorod. Russia advanced toward Pokrovsk in Donetsk and conducted several days worth of missile and drone barrages throughout Ukraine. Russia and Ukraine agreed to a mutual exchange of 115 prisoners of war each, and Ukrainian President Volodymyr Zelensky expressed interest in India’s hosting a second peace summit.
Forecast indicators
Military escalation scenario
- Ukrainian officials claim to have seized control of 1,300 square kilometers of territory and to have captured nearly 600 Russian soldiers as it continued its Kursk incursion.
- Russian forces continue to advance toward Pokrovsk in Ukraine’s Donetsk oblast as Russia launched repeated large–scale drone and ballistic missile attacks against Ukrainian cities spanning the breadth of the country.
- Zelensky announced the domestic development of a new ballistic missile, as well as the drone–launched “Palyanitsya missile.”
Hybrid escalation scenario
- Chinese officials have expressed their intention to circumvent new sanctions enacted by the U.S. following allegations that Chinese companies are supporting Russia’s war effort, as sanctions have delayed Russian payments to China.
- France detained Telegram founder and dual French/Russian citizen Pavel Durov in Paris on charges related to criminal activity taking place on the social media platform. Russian Foreign Minister Sergei Lavrov declared the arrest as a new low in French/Russian relations.
Diplomatic de-escalation scenario
- Zelensky expressed interest in a second peace summit with India as host. Russia stated no preconditions exist that would prevent peace talks.
- Russia and Ukraine have agreed to exchange 115 prisoners of war each after negotiations hosted by the United Arab Emirates.
2 Middle East
Summary
Tensions in the Middle East trended toward military escalation and diplomatic de-escalation scenarios as Israel opened a large-scale operation in the West Bank and exchanged cross-border strikes with Hezbollah in both Lebanon and Syria. Recent mediations between Israel and Hamas faltered, while Iran signaled general openness to discussions over its nuclear program with the U.S.
Forecast Indicators
Military escalation scenario
- Israel initiated a large-scale counterterrorism operation in the West Bank, primarily centered in Tulkarm and Jenin. An Israeli airstrike killed five people in the Nur Sham refugee camp there, an escalatory departure from typical Israeli security operations.
- High-intensity Israeli airstrikes continued inside Gaza, resulting in dozens of Palestinian casualties.
- Israeli airstrikes targeted Hezbollah rocket positions in Lebanon, preempting retaliatory strikes by the group following the recent killing of a senior Hezbollah commander. Hezbollah struck positions in northern Israel.
Hybrid escalation scenario
- Al-Houthi rebels will allow a European Union task force to conduct salvage operations on a tanker carrying 1 million barrels of crude oil that had been damaged Aug. 21 by a Houthi attack in the Red Sea.
Diplomatic de-escalation scenario
- Mediators in Cairo failed to reach consensus over conditions for a Gaza cease-fire, primarily due to contentions over postconflict control of the Philadelphi Corridor.
- Iranian Supreme Leader Ali Khamenei said he is open to negations with the United States over his country’s nuclear program while cautioning his government that the U.S. is not to be trusted.
3 U.S./China/Indo-Pacific
Summary
Tensions in the Indo-Pacific trended toward a diplomatic de-escalation scenario, as U.S. National Security Advisor Jake Sullivan met with Chinese diplomatic and military officials in Beijing. A Chinese reconnaissance plane breached Japanese airspace for the first time. Belarus and China vowed to increase security and economic ties.
Forecast Indicators
Military escalation scenario
- A Chinese Y-9 surveillance plane breached Japanese airspace for the first time, prompting Japan to scramble fighter jets. The Chinese Foreign Ministry claims the incident was unintentional.
- Personnel at a Chinese island base in the South China Sea fired flares at a Philippine fisheries bureau plane.
- U.S. Navy Adm. Samuel Paparo expressed openness to naval escorts of Philippine ships traveling through the South China Sea in an effort to prevent further clashes with China.
- The U.S. Department of Defense is seeking congressional approval to expand the role of special forces to provide training and equipment to allied nations, including Taiwan.
- Taiwan is building five bases that will house U.S.-made Harpoon antiship missiles as of 2026 to bolster its coastal defenses.
Hybrid escalation scenario
- Belarus and China issued a joint statement vowing to strengthen their security and economic ties.
Diplomatic de-escalation scenario
- Sullivan concluded a three-day visit to Beijing, where he and his Chinese counterparts discussed several issues affecting bilateral relations.
- U.S. President Joe Biden and Chinese President Xi Jinping plan a telephone meeting in the coming weeks.
- Trade relations between China and India are improving as India’s tech industry has been pushing for import restrictions to be lifted and Chinese investment into India appears to be rising.
The Global Connectivity Tracker examines the impact of geopolitical dynamics on key themes like the global energy/climate transition, trade, technology, and technology.
1
U.S.
Electricity Generation
What Happened
More than 4 gigawatts (GW) of battery storage capacity were added to the U.S. electric grid in the first half of 2024, making it one of the fastest growing components of utility-scale generation in the country over that period.
Significance/Outlook
Construction of solar energy facilities accounted for 12 of the total 20.1 GW of new capacity added to the U.S. electric generation portfolio since January, according to a preliminary report from the U.S. Energy Information Administration. Over 90 percent of the new battery capacity came online in California, Texas, Arizona, and Nevada. Battery power can be used to store electricity generated by renewable and other sources for use in balancing supply and demand when conditions are not favorable for renewable generation.
2
U.K.
Energy
What Happened
U.K. energy prices are set to rise on Oct. 1 due to extreme weather conditions and global geopolitical tensions.
Significance/Outlook
The rising cost of energy has had a significant effect on U.K. households, particularly those with low incomes. The volatile global natural gas market, influenced by international conflicts, has driven up energy prices in the U.K., which is particularly vulnerable to geopolitical price shocks. In addition, record-breaking heatwaves and violent storms in recent years have boosted electricity and natural gas demand. Climate change has made weather patterns less predictable, making it harder for energy providers to maintain stable prices and increasing customer energy costs.
3
Libya
Oil
What Happened
Eastern Libya’s government said it will halt oil production and exports until further notice due to a central bank crisis.
Significance/Outlook
The shutdown of Libya’s main revenue source follows the Tripoli-based Presidential Council’s dismissal of central bank governor Al-Siddiq Al-Kabir, causing economic panic. In response, a local group in the Al-Wahat region, Libya’s largest oil-producing area, halted oil production, demanding fair wealth distribution before reopening the fields. This action might return Libya to its pre-Geneva political agreement state, posing significant security and political risks. The closure of eastern oil fields, which account for nearly two-thirds of Libya’s output, effectively halts exports. Oil markets reacted with a 3% increase in prices, placing the U.S. and Western nations in a precarious position amid sanctions on Russia.
4
China/EU
Trade
What happened
China has launched an antisubsidy campaign targeting dairy products imported from the EU between March 2023 and April 2024
Significance/Outlook
China’s Ministry of Commerce opened an investigation into subsidy mechanisms by the EU for its dairy products exported to China. The 12-month investigation will focus on 20 subsidy programs in eight member states, namely Austria, Belgium, Croatia, the Czech Republic, Finland, Ireland, Italy and Romania, as well as mechanisms under the EU’s Common Agricultural Policy. The announcement comes after the European Commission’s decision to impose 36% tariffs on imports of Chinese electric vehicles (EVs) following a nine-month investigation that found China to be unfairly dumping cheap EVs into the EU market, threatening domestic production. The EU has expressed fears that a trade war with China is unavoidable.
5
China
Nuclear Energy
Expanding nuclear energy can reduce reliance on fossil fuels and other energy sources that might be more volatile in price. This can also help stabilize or reduce electricity prices and is seen as an opportunity for technological innovation. While the U.S. remains a leader in many areas of nuclear technology, China’s rapid technological advancement could influence the balance of geopolitical power have strategic implications
What Happened
China has approved the construction of 11 nuclear reactors across five regions, marking a record number of permits granted at once.
Significance/Outlook
This move underscores the government’s reliance on nuclear energy to drive emissions reductions and transition to cleaner energy sources. The total investment for these 11 reactors is estimated at nearly $41 billion, with construction expected to span five years, according to state-run China Energy News. With 56 reactors currently in operation and 30 under construction (with an expected capacity of 32,203 megawatts), China leads the world in nuclear construction capacity, according to the Nuclear Energy Association. Notably, Beijing has approved 10 new reactors in just the past two years, further solidifying its commitment to expanding nuclear energy infrastructure. For China, integrating more nuclear power into its energy mix is essential for reaching net-zero targets in the coming decades.