Frontier Markets Weekly, March 18th 2023

US ups aid to Africa | Bangladesh under Russian pressure | Saudi Arabia’s pivot to China | Argentine inflation hits 100%

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

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Blinken announces hundreds of millions in aid during trip to Africa. US Secretary of State Antony Blinken visited Ethiopia and Niger this week, as the US seeks to bolster its presence on the continent. In Ethiopia, Blinken called for accountability for war crimes committed during the country’s civil war, which ended with a fragile peace agreement last November. 

He also announced the provision of $331 million in emergency food and humanitarian assistance, bringing the total US aid to the country in 2023 to $780 million. The US is Ethiopia’s biggest bilateral donor.

Antony Blinken arriving in Addis Ababa, Ethiopia. Photo: Tiksa Negeri via NY Times

In Niger, Blinken announced $150 million for the troubled Sahel region, which has become a hotbed of instability. The aid will be directed toward Niger, Burkina FasoChadMali and Mauritania, Reuters reports. Recent coups in Burkina Faso and Mali, which some analysts have attributed to Russia-linked mercenaries known as the Wagner Group, have destabilized the region and worried US officials concerned about the expansion of Russian influence on the continent.

UN says climate change crimps Africa’s economies. The UN says countries in Africa are spending between 2% and 9% of their budgets on responding to extreme weather events, AP reports. Alongside the war in Ukraine, climate change was a key contributor to a decline in African economic growth from 4.6% in 2021 to 3.6% in 2022, according to the UN.

Heavy rains caused by Cyclone Freddy in destroyed homes in southern Malawi. Photo: Thoko Chikondi, AP

Extreme weather continues to batter the continent. Last week, a cyclone hit Mozambique and Malawi for the second time in the past month, with a death toll climbing into the hundreds.

Many low-income countries, which contribute a small percentage of global emissions but house an increasing percentage of the world’s population, have called for wealthy countries to finance their climate resilience programs. A 2009 pledge by wealthy countries to provide $100 billion a year in climate finance has still not been met, and some critics say the amount is not even close to enough to pay for increasingly common climate catastrophes, Deutsche Welle reports.

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Thailand and EU relaunch trade talks. Thailand and the EU plan to relaunch negotiations for a free trade agreement to boost trade and investment while enhancing market access for goods, protecting intellectual property rights and facilitating trade in energy and raw materials. “Sustainability will also be at the heart of this agreement,” the commission said.

The port of Bangkok. Thailand aims to eliminate tariffs on exports to the European Union’s 27 countries through resumption of trade talks. Photo: Reuters via Nikkei

The EU and Thailand already trade some €42 billion in goods and the EU is Thailand’s fourth-largest trading partner. Thailand is the EU’s fourth-largest trading partner in Southeast Asia. A free trade agreement “would benefit both sides and strengthen/diversify EU trade ties with Indo-Pacific,” European Commissioner for Trade Valdis Dombrovkis wrote on Twitter.

The EU and Thailand initiated trade talks in 2013, but the negotiations were quickly derailed by a military coup in the Southeast Asian country.

Russia presses Bangladesh to sidestep loan payment restrictions. Russia has asked Bangladesh to create a direct payment channel to connect their central banks so they can conduct trade without being hindered by US and EU sanctions, Bloomberg reports.

The Rooppur nuclear power plant under construction. Photo: Rosatom via World Nuclear News

The call comes after Bangladesh missed a number of payments on Russian loans used to finance a nuclear power plant that would be the country’s largest non-oil-or-gas source of energy. At an estimated cost of $12.65 billion, it is also the most expensive infrastructure project Bangladesh has ever constructed, Nikkei reports.

Vietnam tries to boost economy with surprise interest rate cut. A rapidly worsening economic outlook has promoted Vietnam’s central bank to cut interest rates. The 1% cut, which took effect on Wednesday, marks the first decrease in rates since October 2020.

While the country’s tourism sector is rebounding from a pandemic-induced slump, its exports have fallen 20% from recent peaks. Meanwhile, the country’s property sector has been constrained by over two years of rising interest rates: Tight lending conditions contributed to a 90% reduction in the number of licenses issued for new housing projects in 2022, according to economics research consultancy Capital Economics.

The World Bank projects Vietnamese GDP growth will slow to 6.3% in 2023 from 8% in 2022.

Middle East

Saudi Arabia pivots to a non-aligned policy between the US and China. Long a US ally, Saudi Arabia this week made the surprising move of restoring diplomatic relations with Iran in a deal brokered by China, the Wall Street Journal reports. The deal comes after years of direct and proxy conflict between the Gulf Arab States and Iran, particularly in Yemen and Iraq.

Saudi Arabia’s Crown Prince Mohammed Bin Salman apparently sees China, the country’s largest trading partner and also Iran’s main oil buyer, as having greater leverage in keeping peace in the region, Bloomberg reports. Rather than abandoning its partnership with the US, Saudi Arabia is attempting to pursue a non-aligned policy where it plays the US and China off one another to its own benefit.

MBS with Xi Jinping in Riyadh in 2022. Photo: Saudi official photographer via Anadolu Agency/Getty Images

The shifting diplomatic dynamics in the region are evident in Saudi Arabia’s blockbuster contract with Boeing. And Iran is also making a diplomatic push of its own, with senior officials visiting the UAE this week to discuss a similar normalization of ties, the Associated Press reports.

Russia to increase military footprint in the Middle East. After talks between Russia’s President Vladimir Putin and Syria’s President Bashar al-Assad, Syria agreed to host new Russian bases as Russia expands its military presence in the region, Al Jazeera reports. Russia has long maintained a naval facility on the Mediterranean in the Syrian city of Tartus, and has used its military and paramilitary groups such as Wagner to support Assad’s regime during Syria’s civil war.

Russia and Iran have increased military cooperation since Russia’s invasion of Ukraine in 2022 left it isolated and in need of arms and ammunition.

Warships during a 2019 joint Iran, Russia and China military exercise. Photo: AP via WSJ

Also announced this week were joint naval drills in the Gulf of Oman involving Russia, China, and Iran, the Associated Press reports. And Russia and China are holding high-level meetings in Russia this coming week in order to demonstrate their “partnership without limits.”


Turkey and Hungary approve Finland’s NATO entry, leaving Sweden’s bid on pause. Turkey and Hungary said they will approve Finland’s NATO application, removing the biggest barrier to Finland’s joining the alliance after months of diplomatic wrangling. However, Sweden’s bid to join NATO was left languishing as Turkey has expressed concerns about arms exports and the countries’ support for Kurdish groups.

Finnish President Sauli Niinistö (left) with his Turkish counterpart Recep Tayyip Erdoğan in Ankara. Photo: Adem Altan, AFP

Despite policy changes, Ankara has continued blocking Stockholm’s process. Continued delays for Sweden will raise questions about the alliance’s military strategy and the credibility of its membership process.

Former Soviet States send fighter jets to Ukraine. Slovakia has announced that it will send its 13 MiG-29 fighter jets to Ukraine to support the country’s fight against Russian forces. The move comes after Ukrainian President Volodymyr Zelenskiy persistently requested warplanes since the start of the war.

MIG-29 fighter jets. Photo: Omar Marques, Getty Images

The announcement follows Poland’s decision to send four Soviet-era fighter jets to Ukraine. Western allies have been hesitant to deliver fighter jets, citing the risk of direct confrontation with Moscow. Despite public opposition, Slovakia’s Prime Minister Eduard Heger defended the decision, saying it would not drag Slovakia into the war.

Latin America

Honduras shifts allegiance from Taipei to Beijing. Honduras is establishing diplomatic relations with China, marking another setback for Taiwan. Honduras’ President Xiomara Castro said the move is part of an effort to diversify bilateral and trade ties. Honduras is seeking closer cooperation with China to develop clean energy generation, including the construction of three hydroelectric dams.

  • Don’t ‘quench your thirst with poison’, Taiwan tells Honduras after switch to China. (The Guardian)
  • Senior US envoy heads to Honduras as it considers China ties. (Reuters)

The loss of Honduras is part of China’s wider effort to isolate Taiwan diplomatically and assert its claim over the self-governed island. Now Taiwan will be left with only 13 diplomatic partners, mostly small states in Central America and the Pacific as well as the Vatican. 

China has been using investment and access to its consumer markets to entice Taiwan’s diplomatic partners to switch ties, a strategy known as “dollar diplomacy.”

Argentine inflation hits three-decade high. Argentina’s official annual inflation rate has risen over 100%, marking a three-decade high and placing it among the highest in the world, the BBC reports. The surge in prices stems from higher energy import costs and the central bank’s money-printing, with the amount of money in public circulation quadrupling during President Alberto Fernández’s first three years in office, according to central bank data.

Prices have more than doubled in the past year. Photo: Reuters

The IMF has warned of setbacks in Argentina’s economic recovery amid a severe drought that has destroyed crops and undermined agricultural export revenue. Net foreign currency reserves were around $4.2 billion in February, according to private analysts. 

Argentina’s crippling exchange controls have also magnified black market demand for dollars, where the unofficial rate is almost double the official rate. The government has been lobbying to loosen several IMF targets, saying the war in Ukraine and extreme weather conditions are making them more difficult to hit. 

Colombian government accuses gang of breaching ceasefire. Colombian President Gustavo Petro has accused the Gulf Clan of violating a ceasefire agreement by attacking infrastructure in the country’s northwest, Al Jazeera reports. Roadblocks and civil unrest, believed to be perpetrated by illegal miners supported by the gang according to authorities, affected up to 300,000 people across 12 municipalities resulting in shortages of fuel, food, and medicine.

Gustavo Petro is hoping to provide benefits to gang members who surrender. Photo: Luisa Gonzalez, Reuters

Petro is hoping to pass a law approving surrender deals for criminal gangs, including benefits such as reduced prison sentences, in exchange for dismantling operations and paying reparations to victims, among other things. The Gulf Clan, which is made up of former right-wing paramilitaries, is responsible for between 30% and 60% of the drugs exported from Colombia, according to official estimates.

What we’re reading

China arms sales cement its economic and security ties in Africa: study. (South China Morning Post)

Côte d’Ivoire to build ‘green city.’ (Afrik21

US conducts first maritime military drills with West African forces. (Reuters)

SVB collapse unnerves African startups. (African Business)  

Alibaba targets Bangladeshi manufacturers in push to expand. (Nikkei)

Airlines struggle to repatriate dollars from crisis-hit Pakistan. (FT)

More than two years on, impact of Myanmar military coup is ‘devastating.’ (UN)

China warns Philippines not to give US more access to bases. (Radio Free Asia)

Maharlika Investment Fund provides ‘make or break’ test for Philippines’ Marcos. (Nikkei)

Siemens scours Southeast Asia for deals to diversify from China. (FT)

UN sees renewed momentum toward Yemen peace spurred by SaudiIran deal. (Reuters)

Iraq seeks fiscal stability with three-year budget. (Al Arabiya)

Lebanon’s banks begin strike action over ‘arbitrary’ judicial decisions. (Financial Times)

Saudi Aramco makes $160b in profit (The Economist)

Iran’s top leader ‘pardons 22,000 arrested in protests.’ (AP)

UN nuclear watchdog says 2.5 tons of uranium missing in Libya. (AP)

Arab nations seek to bring Syria in from the cold amid broad Middle East realignment. (WSJ)

Iran and Belarus sign cooperation roadmap in Lukashenko visit. (Al Jazeera)

Drug busts tarnish reputation of Montenegrin sailors. (Balkaninsight)

Peru’s Supreme Court agrees to review if Castillo’s right to defense was violated. (Mercopress)

Ecuador and Argentina order out envoys amid diplomatic clash. (ABC)

Despite constitutional ban, El Salvador leader heavily favored for reelection, poll shows. (Reuters)

Petro bill seeks to slash role of Colombian private pensions. (Bloomberg)

Colombia not ruling out new E&P licenses. (BNAmericas)

Latin American nations look to monetize natural gas resources. (Natural Gas Intelligence)

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