Frontier Markets Weekly, February 25th 2023

Indonesia’s carbon trading plan | Iraq to allow use of yuan | Fear over Russia ‘pincer’ move | Panama’s mining spat

By Dan Keeler, Ken Stibler, Noah Berman and Nojan Rostami

Heads-up, New Yorkers! On March 7th, in association with Brand South Africa, FMN will be hosting a special event in New York City focusing on the opportunities for investors arising from South Africa’s Just Energy Transition Partnership, the country’s pioneering effort to rapidly transition to a sustainable energy system. Check out our events page for more details. 

If you’d like to receive this newsletter in your inbox every weekend, sign up at Please also share this link with any friends or colleagues you think would enjoy it.


Uganda and Tanzania stand by fossil fuel projects. Uganda is refusing to reconsiderits plans to build an oil pipeline that could disrupt a national park and generate substantial greenhouse gas emissions, despite criticism over its potential climate impact, Nicholas Bariyo reports in the Wall Street Journal. The country is one of several in Africa and beyond, including the Democratic Republic of the Congo and Namibia, that have drawn the ire of Western governments and climate activists for planned fossil fuel projects.

Credit ratings agency Fitch estimates that Uganda could earn a windfall of up to $2 billion per year from the project, a sizable boost for a country whose annual domestic tax revenue is around $4.5 billion.

Ugandan President Yoweri Museveni says the oil project at Murchison Falls National Park will go ahead. Photo: Badru Katumba for WSJ

Uganda and Tanzania, through which the pipeline will pass on its way to the Indian Ocean, say they cannot afford not to exploit their abundant natural resources. The argument is a familiar one, driven by a disconnect between wealthy carbon-emitting states and lower-income countries that are home to many of the world’s carbon sinks. 

Nigeria goes to the polls. Tens of millions of Nigerians took to the polls on Saturday in a presidential election that will shape the future of Africa’s biggest economy. The leading candidates include political stalwarts Atiku Abubakar and Bola Tinubu, and dark horse candidate Peter Obi.

Supporters of Nigeria’s Labour Party at a rally in Ibadan, southwestern Nigeria. Photo: Pius Utomi Ekpei/AFP via NPR

Frustration has boiled over in Nigeria in recent weeks amid a fuel shortage and a botched banknote exchange. Some analysts worried this frustration could spill into election day, but there were no significant reports of violence during early voting, despite some of the polling stations opening late. The Council on Foreign Relations reported this week that there is a reasonable risk of political violence stemming from the poll.

An election free from violence would mark a major milestone for the country, Africa’s most populous, in the first vote without a former military leader on the ballot since the country turned to democracy 24 years ago.

Ecowas maintains sanctions on military states. The Economic Community of West African States announced this week it would keep sanctions on Burkina FasoGuineaand Mali. Sanctions have the potential to disrupt global mineral production; Guinea is the world’s largest bauxite producer, and Burkina Faso and Mali are two of West Africa’s largest producers of gold.

Ecowas leaders voted to continue to maintain sanctions against Guinea, Mali and Burkina Faso. Photo: Ecowas Commission

The decision all but kills a bid by the three countries to rejoin the African Union, from which they have been suspended since coups deposed rulers in each country, The East African reports. The three countries had appealed to the AU last week for their suspensions to be lifted and pledged to facilitate global trade. The AU suspends members that undergo unconstitutional changes in their political systems, the East African reports. 

Each country was suspended from Ecowas between 2020 and 2022. The bloc also announced a travel ban against Burkina Faso’s military rulers, Bloomberg reports.


Bangladesh shuts down opposition newspaper. A judge in Bangladesh upheld a government order to shutter Dainik Dinkal, one of the country’s few opposition media organizations, on Monday. The government had accused the newspaper of breaking printing and publication laws.

The move comes amid a wider crackdown on free press in the country. In January, the ruling Bangladesh Awami League (AL) ordered 191 news websites to cease publication, accusing them of publishing “anti-state” news. Many of Bangladesh’s newspapers are controlled by businesses affiliated with the AL, Deutsche Welle reports.

Citizens protest against the latest newspaper closure. Photo: Munir Uz Zaman, via DW

According to The World Freedom Press Index, a tool compiled by Reporters Without Borders, Bangladesh ranks 162nd of 180 countries in media freedom. Meanwhile, more than a fifth of the country’s population has little to no access to mainstream media.

Indonesia starts carbon trading. Indonesia launched a mandatory carbon trading mechanism for coal power plants on Wednesday. The carbon trading program will apply to 99 of the country’s coal power plants, Reuters reports. There are at least 237 coal-fired power plants in Indonesia, according to Argus Media, with around 100 more under construction.

The equivalent of over 500,000 tons of carbon dioxide emissions are eligible to be traded. Power plants that exceed their emissions quota will need to make up for the excess by buying carbon credits from lower-emitting plants. The price of the credits will be set by the market.

Coal being unloaded at the Karya Citra Nusantara port in North Jakarta. Photo: Willy Kurniawan, Reuters

The mandatory trading mechanism currently applies only to coal plants of a certain size, but it could soon be applied to smaller coal plants and other types of power plants, such as liquified natural gas.

Indonesia is planning to phase out its coal power plants by 2040, according to Mongabay, as part of its goal to reach net-zero emissions by 2060.

Middle East

Iranian rial falls to record low against dollar. Iran’s currency sank to a new low of 500,000 to the dollar on Monday on news that the US and EU are considering a new round of sanctions on the Islamic Republic, Al-Jazeera reports. Just five years ago the rial was trading at 40,000 to the dollar, before the US abandoned the 2015 nuclear deal and reimposed harsh sanctions.

Iran’s currency has plunged recently. Photo: Majid Asgaripour/WANA

The continued collapse of the rial follows news on Sunday that the International Atomic Energy Agency found Iranian uranium enriched to 84% purity–the closest Iran has ever come to weapons-grade 90% enrichment. Iran’s civilian nuclear program spokesman denied the report, claiming that the highly enriched uranium was a limited and temporary byproduct of material intended for civilian use, although sources close to the government later acknowledged it.

Iran’s violation of nuclear inspection and enrichment agreements—and its military support of Russia’s invasion of Ukraine—are major roadblocks to renegotiating the 2015 nuclear deal and getting sanctions lifted. 

Saudi Arabian deal to buy Egypt’s United Bank falls through. Disagreement over valuation methodology between Saudi Arabia’s Public Investment Fund and Egypt’s United Bank, after a fall in value of the Egyptian pound, has prompted Saudi Arabia to put the deal on hold, Bloomberg reports. Egypt’s central bank asked to value the transaction in dollars, but Saudi Arabia wanted the valuation to account for its original minority stake in the bank using the exchange rate at the time of purchase.

Last year, the PIF helped shore up Egypt’s struggling economy by depositing $5 billion in the central bank and leading a $30 billion round of investments in Egypt’s private sector, which included its initial minority stake in United Bank, Reuters reports. Since then, the Egyptian pound has depreciated more than 50%, slashing the dollar value of Saudi Arabia’s investments.

The PIF had also formed an investment vehicle–the Saudi Egyptian Investment Co (SEIC)–to make direct investments of $1.3 billion in Egyptian chemical, shipping, industrial, and fintech companies. 

Iraq to settle bilateral trade with China in yuan to defend the dinar. Iraq’s central bank announced on Wednesday that it would settle purchases of Chinese imports directly in yuan in order to improve its foreign reserves balance, Reuters reports. The move comes as strict US currency controls intended to limit dollar flows to sanctioned Iran and Russia contributed to a dollar shortage, threatening the dinar’s peg.

Chinese yuan banknotes. Image: Florence Lo, Reuters

The central bank will hold yuan in reserve and directly supply yuan to local buyers of Chinese imports. According to the prime minister’s office, yuan settlement only applies to private sector trade and won’t extend to Iraq’s oil industry.

The move comes on the heels of Chinese President Xi Jinping’s announcement at a Gulf states summit in Saudi Arabia that he hoped China would be able to pay for oil and gas from the region in yuan.


Emerging Europe profits from prime geography and strong demographics amid trade realignment. Russia’s war on Ukraine has undermined economic growth in emerging Europe, but the conflict-related disruption is sowing the seeds for a trade and logistics boom in the region. 

  • Read more: Russia became Bulgaria’s largest importer in 2022. (Euractiv)

Research from logistics giant Maersk and media firm Reuters shows the majority of European manufacturers and retailers are changing their sourcing strategies and increasingly considering countries such as PolandRomania and the Czech Republicfor manufacturing. The report also found that Western Europe’s labor shortages make the relative demographic stability of Eastern European countries especially attractive.

Unease about sourcing from Russia is prompting changes in sourcing strategy. Photo via Maersk

New figures from the German Eastern Business Association this week showed that German trade with Central and Eastern Europe climbed to a new high of $597 billion in 2022. The figures highlight a reorientation of European trade relations, with a decline in exports to Russia being offset by double-digit increases to other markets in Central and Eastern Europe. 

Analysis: Fears grow of a Russian pincer from Belarus and Moldova. After Russia’s failure to make headway in its war on Ukraine, recent developments in neighboring Belarus and Moldova suggest Russian premier Vladimir Putin could be considering more radical means to win the war.

Belarus, long a close Russian ally, has provided support and access to Russian troops without itself sending soldiers. However, President Alexander Lukashenko recently said Belarus would not attack Ukraine unless first attacked. Such statements could be intended to establish pretext for a so-called false flag operation during the spring once his country’s new 100,0000 person volunteer army is equipped.

A Ukrainian soldier in a trench close to the Belarusian border. Photo: Lynsey Addario for The New York Times

To Ukraine’s west, Moldova has flagged suspected destabilization efforts that revived fears that the Russian backed Transnistria breakaway region could be used to attack the relatively soft east. Moscow seemed to confirm its intolerance of Moldova’s pro-Western stance this week when Putin revoked a decree that guaranteed Moldovan sovereignty. 

While Ukrainian and Moldovan intelligence organizations have so far been effective at thwarting Moscow’s alleged plots, and analysts doubt Russia’s capacity to expand the conflict, additional fronts in the war would quickly stretch Ukraine and its allies. A pincer move on two sides of Ukraine would test the West’s economic and political commitment to Kiev while escalating the chances of a true proxy conflict as China is reportedly considering supplying weapons to Russia.

Hungary’s Orbán moves closer to becoming an independent power in the EU.Hungary’s Prime Minister Viktor Orbán is expanding his grip on the armed forces and defense industry through a wave of deals as he develops what amounts to an independent foreign policy inside the EU.

Hungarian Prime Minister Viktor Orbán. Photo: Arpad Kurucz/AOP

Orbán has expressed his intent to build “a military industry here at home…that can produce modern weapons.” More recently, Orbán’s efforts have bled into the armed forces, with longtime ally Kristóf Szalay-Bobrovniczky pushing to trim the military’s top ranks in a move critics say is meant to purge the officer corps of pro-NATO and anti-Orbán officials. 

The efforts come as the Hungarian government has crafted an independent foreign policy somewhere between the traditional trans-Atlantic alliance’s and those of illiberal powers such as Russia and China. This week, Orbán directed his ruling Fidesz party to back Finland and Sweden’s NATO bids, despite internal divisions on the issue. Two days later, he also suggested that he would again block sanctions against Russia unless several individuals were removed from the list.

Latin America

Copper mine row threatens Panama’s economy and business-friendly reputation.Copper miner First Quantum Minerals is slowing processing at its Panamanian mine and could fully shut down operations as the company clashes with the Panamanian government, Bloomberg reports. Late last year, the two sides failed to reach an agreement over issues including taxation levels. 

The Panamanian government escalated the feud earlier this month, preventing the loading of copper concentrate at the port, effectively stopping First Quantum from exporting. With limited storage capacity at the mine, the Canada-based miner warned that it would soon run out of space and be forced to begin laying off its workforce of 8,000 people in Panama over the next few weeks if it wasn’t allowed to resume shipments.

First Quantum’s Cobre Panamá complex. Photo: Centro de Incidencia Ambiental

Panama is joining Mexico, the Democratic Republic of CongoPakistanPeruBoliviaChileZambiaTanzania and Australia in pushing mining companies for tax or ownership increases. But while investors expect the duel to be short-lived, Panama’s hardball tactics could threaten its perception as a mining- and business-friendly jurisdiction.

What we’re reading

Patients dying as Nigerian cash crisis hits health services before election. (The Guardian)

France eyes Côte d’Ivoire after Burkina Faso boots out troops. (Reuters)

UN says DRC will need $2.25b to aid uprooted people in rebel-hit east. (Reuters)

Egypt fears tension with Gulf states could stop ‘generosity’ and increase economic woe. (The Africa Report)

Ex-bankers sentenced to jail for defrauding Libyan sovereign wealth fund. (FT)

Guarantee companies unlock African infrastructure finance. (FT)

Japan’s Mitsubishi and Taisei scale back in crisis-stricken Sri Lanka. (Nikkei)

China risks militants’ wrath in AfghanistanPakistan and beyond. (Nikkei)

Asia’s easing economic headwinds open way for stronger recovery. (IMF)

Despite opposition, Philippines ratifies RCEP trade agreement. (The Diplomat

Jokowi seeks support from China for Indonesia’s new capital. (Nikkei)

North Korean hackers stole a record $1.7b of crypto last year. (The Economist)

Pakistan’s $700m loan from China intensifies debt burden fears. (The Guardian)

Oman to establish regulatory framework for virtual assets. (Coin Telegraph

Saudi Arabia deposits $1b into Yemen’s central bank. (AP)

Germany expels two Iranian diplomats over death sentences. (AP)

Jordan summit planned by US at risk after Israeli raid in West Bank. (The Times of Israel)

Biden shows firm support for Moldova. (Romania Insider

Ukraine grain shipments slow as export deal with Russia nears end. (WSJ)

Russian mercenary boss accuses top army brass of ‘treason.’ Moscow pushes back. (Reuters)

Russia’s undeclared war on the West in the Sahel. (The Africa Report)

Peru’s economic outlook brightens as fatigued protesters go home. (Bloomberg)

Paraguay president seeks to calm China jitters on Taiwan trip. (Reuters)

Drought-hit Uruguay receives first Argentine power exports of 2023. (BNamericas)

Argentina government loses Senate power after senators exit coalition (Reuters

China is banking on Argentina’s future glory. (The Diplomat)

El Salvador hails 300 homicide-free days—and plans to export its security strategy. (Bloomberg Lìnea)

Welcome to Frontier Markets News

Sign up to receive our frontier and emerging markets newsletter.

We don’t spam and we won't share your info!

Leave a Reply

Your email address will not be published. Required fields are marked *